TIDMBOCH
RNS Number : 7201X
Bank of Cyprus Holdings PLC
31 August 2022
Consolidated Condensed Interim Financial Statements for the six
months ended 30 June 2022
Interim Consolidated Income Statement
Six months ended
30 June
2022 2021
(restated)
----- ------------------------ --------------------------
Notes EUR000 EUR000
----- ------------------------ --------------------------
Turnover 7 414,996 390,624
----- ------------------------ --------------------------
Interest income 181,470 179,272
----- ------------------------ --------------------------
Income similar to interest income 9,518 17,626
----- ------------------------ --------------------------
Interest expense (37,541) (28,670)
----- ------------------------ --------------------------
Expense similar to interest expense (7,752) (16,015)
----- ------------------------ --------------------------
Net interest income 145,695 152,213
----- ------------------------ --------------------------
Fee and commission income 98,086 87,610
----- ------------------------ --------------------------
Fee and commission expense (4,447) (3,753)
----- ------------------------ --------------------------
Net foreign exchange gains 11,898 6,550
----- ------------------------ --------------------------
Net losses on financial instruments 8 (2,060) (13,196)
----- ------------------------ --------------------------
Net gains on derecognition of financial assets
measured at amortised cost 1,648 1,053
----- ------------------------ --------------------------
Income from assets under insurance and reinsurance
contracts 29,859 103,824
----- ------------------------ --------------------------
Expenses from liabilities under insurance
and reinsurance contracts 3,010 (72,756)
----- ------------------------ --------------------------
Net losses from revaluation and disposal of
investment properties (1,372) (1,381)
----- ------------------------ --------------------------
Net gains on disposal of stock of property 8,242 7,372
----- ------------------------ --------------------------
Other income 8,927 5,854
----- ------------------------ --------------------------
Total operating income 299,486 273,390
----- ------------------------ --------------------------
Staff costs 9 (103,135) (100,866)
----- ------------------------ --------------------------
Special levy on deposits and other levies/contributions 9 (16,507) (15,255)
----- ------------------------ --------------------------
Other operating expenses 9 (80,393) (95,588)
----- ------------------------ --------------------------
Operating profit before credit losses and
impairment 99,451 61,681
----- ------------------------ --------------------------
Credit losses on financial assets 10 (24,965) (52,163)
----- ------------------------ --------------------------
Impairment net of reversals on non--financial
assets 10 (12,157) (7,398)
----- ------------------------ --------------------------
Profit before tax 62,329 2,120
----- ------------------------ --------------------------
Income tax 11 (11,579) (968)
----- ------------------------ --------------------------
Profit after tax for the period 50,750 1,152
----- ------------------------ --------------------------
Attributable to:
----- ------------------------ --------------------------
Owners of the Company 50,088 739
----- ------------------------ --------------------------
Non--controlling interests 662 413
----- ------------------------ --------------------------
Profit for the period 50,750 1,152
----- ------------------------ --------------------------
Basic and diluted profit per share attributable
to the owners of the Company
(EUR cent) 12 11.2 0.2
----- ------------------------ --------------------------
Interim Consolidated Statement of Comprehensive Income
Six months ended
30 June
2022 2021
----- -------------------- -------------------
Notes EUR000 EUR000
----- -------------------- -------------------
Profit for the period 50,750 1,152
----- -------------------- -------------------
Other comprehensive income (OCI)
----- -------------------- -------------------
OCI that may be reclassified in the consolidated
income statement in subsequent periods (20,412) 1,059
----- -------------------- -------------------
Fair value reserve (debt instruments) (17,909) 2,258
----- -------------------- -------------------
Net (losses)/gains on investments in debt
instruments measured at fair value through
OCI (FVOCI) (17,421) 2,258
----- -------------------- -------------------
Transfer to the consolidated income statement
on disposal (488) -
----- -------------------- -------------------
Foreign currency translation reserve (2,503) (1,199)
----- -------------------- -------------------
Profit/(loss) on translation of net investments
in foreign branches and subsidiaries 1,576 (5,003)
----- -------------------- -------------------
(Loss)/profit on hedging of net investments
in foreign branches and subsidiaries 14 (4,079) 3,867
----- -------------------- -------------------
Transfer to the consolidated income statement
on dissolution/disposal of foreign branches
and subsidiaries - (63)
----- -------------------- -------------------
OCI not to be reclassified in the consolidated
income statement in subsequent periods (211) 6,967
----- -------------------- -------------------
Fair value reserve (equity instruments) (2,051) 576
----- -------------------- -------------------
Net (losses)/gains on investments in equity
instruments designated at FVOCI (2,051) 576
----- -------------------- -------------------
Property revaluation reserve - (40)
----- -------------------- -------------------
Deferred tax 11 - (40)
----- -------------------- -------------------
Actuarial gains on defined benefit plans 1,840 6,431
----- -------------------- -------------------
Remeasurement gains on defined benefit plans 1,840 6,431
----- -------------------- -------------------
Other comprehensive (loss)/income for the
period net of taxation (20,623) 8,026
----- -------------------- -------------------
Total comprehensive income for the period 30,127 9,178
----- -------------------- -------------------
Attributable to:
----- -------------------- -------------------
Owners of the Company 29,465 8,780
----- -------------------- -------------------
Non--controlling interests 662 398
----- -------------------- -------------------
Total comprehensive income for the period 30,127 9,178
----- -------------------- -------------------
Interim Consolidated Balance Sheet
30 June 31 December
2022 2021
(restated)
Assets Notes EUR000 EUR000
------ -------------------------- -----------------------
Cash and balances with central banks 27 9,904,549 9,230,883
------ -------------------------- -----------------------
Loans and advances to banks 27 312,308 291,632
------ -------------------------- -----------------------
Derivative financial assets 14 38,150 6,653
------ -------------------------- -----------------------
Investments at FVPL 13 181,318 199,194
------ -------------------------- -----------------------
Investments at FVOCI 13 529,872 748,695
------ -------------------------- -----------------------
Investments at amortised cost 13 1,391,487 1,191,274
------ -------------------------- -----------------------
Loans and advances to customers 16 10,144,099 9,836,405
------ -------------------------- -----------------------
Life insurance business assets attributable
to policyholders 533,696 551,797
------ -------------------------- -----------------------
Prepayments, accrued income and other assets 18 621,955 616,219
------ -------------------------- -----------------------
Stock of property 17 1,054,034 1,111,604
------ -------------------------- -----------------------
Deferred tax assets 11 265,430 265,481
------ -------------------------- -----------------------
Investment properties 102,040 117,745
------ -------------------------- -----------------------
Property and equipment 245,693 252,130
------ -------------------------- -----------------------
Intangible assets 171,403 184,034
------ -------------------------- -----------------------
Non--current assets and disposal groups held
for sale 19 347,698 358,951
------ -------------------------- -----------------------
Total assets 25,843,732 24,962,697
------ -------------------------- -----------------------
Liabilities
------ -------------------------- -----------------------
Deposits by banks 492,022 457,039
------ -------------------------- -----------------------
Funding from central banks 20 2,954,808 2,969,600
------ -------------------------- -----------------------
Derivative financial liabilities 14 9,485 32,452
------ -------------------------- -----------------------
Customer deposits 21 18,450,216 17,530,883
------ -------------------------- -----------------------
Insurance liabilities 689,798 736,201
------ -------------------------- -----------------------
Accruals, deferred income, other liabilities
and other provisions 23 394,117 361,977
------ -------------------------- -----------------------
Pending litigation, claims, regulatory and
other matters 104,793 104,108
------ -------------------------- -----------------------
Debt securities in issue 22 298,899 302,555
------ -------------------------- -----------------------
Subordinated liabilities 22 311,738 340,220
------ -------------------------- -----------------------
Deferred tax liabilities 11 45,235 46,435
------ -------------------------- -----------------------
Total liabilities 23,751,111 22,881,470
------ -------------------------- -----------------------
Equity
------ -------------------------- -----------------------
Share capital 24 44,620 44,620
------ -------------------------- -----------------------
Share premium 24 594,358 594,358
------ -------------------------- -----------------------
Revaluation and other reserves 182,329 213,192
------ -------------------------- -----------------------
Retained earnings 1,028,218 986,623
------ -------------------------- -----------------------
Equity attributable to the owners of the Company 1,849,525 1,838,793
------ -------------------------- -----------------------
Other equity instruments 24 220,000 220,000
------ -------------------------- -----------------------
Non--controlling interests 23,096 22,434
------ -------------------------- -----------------------
Total equity 2,092,621 2,081,227
------ -------------------------- -----------------------
Total liabilities and equity 25,843,732 24,962,697
------ -------------------------- -----------------------
Chief Executive
Mr. E.G. Arapoglou Chairman Mr. P. Nicolaou Officer
Mr. N. Sofianos Director Mrs. E. Livadiotou Executive Director
Finance & Legacy
Interim Consolidated Statement of Changes in Equity
Attributable to the owners of the Company
Share Share Treasury Retained Property Financial Life insurance Foreign Total Other Non-- Total
capital premium shares earnings revaluation instruments in--force currency equity controlling equity
(Note (Note (Note reserve fair business translation instruments interests
24) 24) 24) value reserve reserve (Note
reserve 24)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
1 January 2022 44,620 594,358 (21,463) 986,623 80,060 23,285 113,651 17,659 1,838,793 220,000 22,434 2,081,227
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Profit for the
period - - - 50,088 - - - - 50,088 - 662 50,750
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Other
comprehensive
income/(loss)
after
tax for the
period - - - 1,840 - (19,960) - (2,503) (20,623) - - (20,623)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Total
comprehensive
income/(loss)
after
tax for the
period - - - 51,928 - (19,960) - (2,503) 29,465 - 662 30,127
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Decrease in
value of
in--force
life
insurance
business - - - 9,600 - - (9,600) - - - - -
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Tax on
decrease in
value
of in--force
life
insurance
business - - - (1,200) - - 1,200 - - - - -
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Defence
contribution - - - (4,983) - - - - (4,983) - - (4,983)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Payment of
coupon to
AT1 holders
(Note 24) - - - (13,750) - - - - (13,750) - - (13,750)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
30 June 2022 44,620 594,358 (21,463) 1,028,218 80,060 3,325 105,251 15,156 1,849,525 220,000 23,096 2,092,621
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Interim Consolidated Statement of Changes in Equity
Attributable to the owners of the Company
Share Share Treasury Retained Property Financial Life insurance Foreign Total Other Non-- Total
capital premium shares earnings revaluation instruments in--force currency equity controlling equity
(Note (Note (Note reserve fair business translation instruments interests
24) 24) 24) value reserve reserve (Note
reserve 24)
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
1 January 2021 44,620 594,358 (21,463) 982,513 79,515 22,894 110,401 17,806 1,830,644 220,000 24,410 2,075,054
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Profit for the
period - - - 739 - - - - 739 - 413 1,152
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Other
comprehensive
income/(loss)
after
tax for the
period - - - 6,431 (30) 2,834 - (1,194) 8,041 - (15) 8,026
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Total
comprehensive
income/(loss)
after
tax for the
period - - - 7,170 (30) 2,834 - (1,194) 8,780 - 398 9,178
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Increase in
value of
in--force
life
insurance
business - - - (3,886) - - 3,886 - - - - -
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Tax on
increase in
value
of in--force
life
insurance
business - - - 486 - - (486) - - - - -
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Payment of
coupon to
AT1 holders
(Note 24) - - - (13,750) - - - - (13,750) - - (13,750)
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
30 June 2021 44,620 594,358 (21,463) 972,533 79,485 25,728 113,801 16,612 1,825,674 220,000 24,808 2,070,482
--------------- --------------- --------------- ---------------- ---------------- --------------- --------------- --------------- --------------- ------------ ------------- ---------------
Interim Consolidated Statement of Cash flow
Six months ended
30 June
2022 2021
(restated)
---- ------------------ --------------------------
Note EUR000 EUR000
---- ------------------ --------------------------
Profit before tax 62,329 2,120
---- ------------------ --------------------------
Adjustments for:
---- ------------------ --------------------------
Share of profit from associates - (137)
---- ------------------ --------------------------
Depreciation of property and equipment and amortisation
of intangible assets 16,908 17,591
---- ------------------ --------------------------
Impairment of stock of property and other non--financial
assets 12,157 7,398
---- ------------------ --------------------------
Change in value of in--force life insurance business 9,600 (3,886)
---- ------------------ --------------------------
Credit losses of financial assets 10 24,965 52,163
---- ------------------ --------------------------
Net gains on derecognition of financial assets
measured at amortised cost (1,648) (1,053)
---- ------------------ --------------------------
Amortisation of discounts/premiums and interest
on debt securities (8,767) (10,273)
---- ------------------ --------------------------
Dividend income (368) (462)
---- ------------------ --------------------------
Net loss on disposal of investment in debt securities 2,826 -
---- ------------------ --------------------------
Loss from revaluation of debt securities designated
as fair value hedges 38,007 7,886
---- ------------------ --------------------------
Interest on subordinated liabilities and debt
securities in issue 14,258 11,699
---- ------------------ --------------------------
Negative interest on loans and advances to banks
and balances with central banks 20,104 13,141
---- ------------------ --------------------------
Negative interest on funding from central banks (14,792) (9,469)
---- ------------------ --------------------------
(Profit)/loss on disposal/dissolution of subsidiaries
and associates (179) 880
---- ------------------ --------------------------
Loss from buyback of subordinated loan stock 8 - 12,433
---- ------------------ --------------------------
Net gains on disposal of stock of property and
investment properties (8,358) (7,615)
---- ------------------ --------------------------
(Profit)/loss on sale and write offs of property
and equipment and intangible assets (51) 62
---- ------------------ --------------------------
Interest expense on lease liability - 44
---- ------------------ --------------------------
Net losses from revaluation of investment properties
and investment properties held for sale 1,488 1,624
---- ------------------ --------------------------
168,479 94,146
---- ------------------ --------------------------
Change in:
---- ------------------ --------------------------
Loans and advances to banks 36,345 (34,402)
---- ------------------ --------------------------
Deposits by banks 34,983 8,732
---- ------------------ --------------------------
Obligatory balances with central banks (7,883) (1,278)
---- ------------------ --------------------------
Customer deposits 919,333 268,039
---- ------------------ --------------------------
Life insurance assets and liabilities (28,302) (7,137)
---- ------------------ --------------------------
Loans and advances to customers (356,885) (117,251)
---- ------------------ --------------------------
Prepayments, accrued income and other assets (16,810) (14,913)
---- ------------------ --------------------------
Pending litigation, claims, regulatory and other
matters 685 4,986
---- ------------------ --------------------------
Accruals, deferred income, other liabilities and
other provisions 34,092 32,290
---- ------------------ --------------------------
Derivative financial instruments (54,464) 12,459
---- ------------------ --------------------------
Investments measured at FVPL 17,876 4,432
---- ------------------ --------------------------
Stock of property 86,519 81,047
---- ------------------ --------------------------
833,968 331,150
---- ------------------ --------------------------
Tax paid (441) (813)
---- ------------------ --------------------------
Net cash from operating activities 833,527 330,337
---- ------------------ --------------------------
Cash flows from investing activities
---- ------------------ --------------------------
Purchases of debt, treasury bills and equity securities (329,751) (603,791)
---- ------------------ --------------------------
Proceeds on disposal/redemption of investments
in debt and equity securities 295,856 304,990
---- ------------------ --------------------------
Interest received from debt securities 17,230 11,660
---- ------------------ --------------------------
Dividend income from equity securities 368 462
---- ------------------ --------------------------
Proceeds on disposal of held for sale portfolios 19 - 144,300
---- ------------------ --------------------------
Deposits on held for sale portfolios 900 -
---- ------------------ --------------------------
Proceeds on disposal of subsidiaries and associates - 9,084
---- ------------------ --------------------------
Purchases of property and equipment (817) (942)
---- ------------------ --------------------------
Purchases of intangible assets (6,046) (4,840)
---- ------------------ --------------------------
Proceeds on disposals of property and equipment
and intangible assets 109 1,138
---- ------------------ --------------------------
Proceeds on disposals of investment properties 23,384 2,577
---- ------------------ --------------------------
Net cash from/(used in) investing activities 1,233 (135,362)
---- ------------------ --------------------------
Six months ended
30 June
---- ---------------------------------------------
2022 2021
(restated)
---- ------------------ -------------------------
Note EUR000 EUR000
---- ------------------ -------------------------
Cash flow from financing activities
---- ------------------ -------------------------
Payment of AT1 coupon 24 (13,750) (13,750)
---- ------------------ -------------------------
Payment of defence contribution (4,983) -
---- ------------------ -------------------------
Net proceeds of funding from central banks - 2,000,000
---- ------------------ -------------------------
Proceeds from issue of subordinated liabilities
(net of costs) - 297,551
---- ------------------ -------------------------
Repayments of subordinated liabilities (35,605) (223,627)
---- ------------------ -------------------------
Proceeds from the issue of debt securities (net
of costs) - 298,505
---- ------------------ -------------------------
Interest on subordinated liabilities (3,293) (23,125)
---- ------------------ -------------------------
Interest on debt securities in issue (7,500) -
---- ------------------ -------------------------
Negative interest on loans and advances to banks
and balances with central banks (20,104) (13,141)
---- ------------------ -------------------------
Principle elements of lease payments (3,507) (3,901)
---- ------------------ -------------------------
Net cash (used in)/from financing activities (88,742) 2,318,512
---- ------------------ -------------------------
Net increase in cash and cash equivalents 746,018 2,513,487
---- ------------------ -------------------------
Cash and cash equivalents 1 January 9,255,210 5,890,135
---- ------------------ -------------------------
Foreign exchange adjustments (23,236) (10,100)
---- ------------------ -------------------------
30 June 27 9,977,992 8,393,522
---- ------------------ -------------------------
Non--cash transactions
Repossession of collaterals
During the six months ended 30 June 2022, the Group acquired properties
by taking possession of collaterals held as security for loans and
advances to customers of EUR23,058 thousand (six months ended 30
June 2021: EUR24,692 thousand).
Disposal of Project Helix 2
During the six months ended 30 June 2021 and upon the completion
of the disposal of Project Helix 2, the Group recognised an amount
of EUR381,567 thousand in other financial assets, which represents
the fair value of the deferred consideration receivable for the transaction
(the 'DPP'). Please refer to Note 18 for further details.
Notes to the Consolidated Condensed Interim Financial
Statements
1. Corporate information
Bank of Cyprus Holdings Public Limited Company (the 'Company') was
incorporated in Ireland on 11 July 2016, as a public limited company
under company number 585903 in accordance with the provisions of
the Companies Act 2014 of Ireland (Companies Act 2014). Its registered
office is 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. The
Company is incorporated in Ireland and is tax resident in Cyprus.
Bank of Cyprus Holdings Public Limited Company is the holding company
of Bank of Cyprus Public Company Limited ('BOC PCL') with principal
place of business in Cyprus. The Bank of Cyprus Holdings Group (the
'Group') comprises the Company, its subsidiary, BOC PCL, and the
subsidiaries of BOC PCL. Bank of Cyprus Holdings Public Limited Company
is the ultimate parent company of the Group.
The principal activities of BOC PCL and its subsidiary companies
(the 'BOC Group') involve the provision of banking services, financial
services, insurance services and the management and disposal of property
predominately acquired in exchange of debt.
BOC PCL is a significant credit institution for the purposes of the
SSM Regulation and has been designated by the CBC as an 'Other Systemically
Important Institution' (O--SII). The Group is subject to joint supervision
by the ECB and the CBC for the purposes of its prudential requirements.
The shares of the Company are listed and trading on the London Stock
Exchange (LSE) and the Cyprus Stock Exchange (CSE).
Consolidated Condensed Interim Financial Statements
The Consolidated Condensed Interim Financial Statements of the Company
for the six months ended 30 June 2022 (the Consolidated Financial
Statements) were authorised for issue by a resolution of the Board
of Directors on 30 August 2022.
The Consolidated Financial Statements are available on the Group's
website www.bankofcyprus.com (Group/Investor Relations/Financial
Results).
2. Unaudited financial statements
The Consolidated Financial Statements have not been audited by the
Group's external auditors.
The Group's external auditors have conducted a review in accordance
with the International Standard on Review Engagements 2410 'Review
of Interim Financial Information performed by the Independent Auditor
of the Entity'.
3. Summary of significant accounting policies
3.1 Basis of preparation
The Consolidated Financial Statements have been prepared on a historical
cost basis, except for properties held for own use and investment
properties, investments at fair value through other comprehensive
income (FVOCI), financial assets (including loans and advances to
customers and investments) at fair value through profit or loss (FVPL)
and derivative financial assets and derivative financial liabilities
that have been measured at fair value, non--current assets held for
sale measured at fair value less costs to sell and stock of property
measured at net realisable value where this is lower than cost. The
carrying values of recognised assets and liabilities that are hedged
items in fair value hedges, and otherwise carried at cost, are adjusted
to record changes in fair value attributable to the risks that are
being hedged.
Presentation of the Consolidated Financial Statements
The Consolidated Financial Statements are presented in Euro (EUR)
and all amounts are rounded to the nearest thousand, except where
otherwise indicated. A comma is used to separate thousands and a
dot is used to separate decimals.
The Group presents its balance sheet broadly in order of liquidity.
An analysis regarding expected recovery or settlement of assets and
liabilities within twelve months after the balance sheet date and
more than twelve months after the balance sheet date is presented
in Note 28.
Comparative information
Comparative information was restated following certain changes in
the presentation of the primary statements for the six months ended
30 June 2022 as described further below.
Reclassifications within the Consolidated Income Statement
'Gains/(losses) on disposal/dissolution of subsidiaries and associates',
previously presented within 'Net (losses)/gains on financial instrument
transactions and disposal/dissolution of subsidiaries and associates',
are now presented within 'Other income'. 'Net gains/(losses) on financial
instrument transactions' has been renamed to 'Net gains/(losses)
on financial instruments'. 'Share of profit/(loss) from associates'
previously presented separately in the Consolidated Income Statement
is now presented within 'Other income' as well. As a result of these
changes in the presentation of 'Other income' 'Turnover' is also
restated as indicated below.
Insurance income and expense previously presented in a single line
as insurance income net of claims and commissions is now presented
separately, whereas credit losses relating to financial assets, including
loans and advances to customers, is now presented in a single line.
Analysis of the individual components included within each line item
is presented in the respective Notes.
30 June Reclassifications 30 June 2021
2021 (restated)
(as previously
presented)
EUR000 EUR000 EUR000
---------------------- --------------------------- ----------------------
Net losses on financial instrument
transactions and disposal/dissolution
of subsidiaries and associates (14,076) 14,076 n/a
---------------------- --------------------------- ----------------------
Net losses on financial instruments n/a (13,196) (13,196)
---------------------- --------------------------- ----------------------
Share of profit from associate 137 (137) n/a
---------------------- --------------------------- ----------------------
Other income 6,597 (743) 5,854
---------------------- --------------------------- ----------------------
(7,342) - (7,342)
---------------------- --------------------------- ----------------------
Insurance income net of claims and
commissions 31,068 (31,068) n/a
---------------------- --------------------------- ----------------------
Income from assets under insurance
and reinsurance contracts n/a 103,824 103,824
---------------------- --------------------------- ----------------------
Expenses from liabilities under insurance
and reinsurance contracts n/a (72,756) (72,756)
---------------------- --------------------------- ----------------------
31,068 - 31,068
---------------------- --------------------------- ----------------------
Credit losses to cover credit risk
on loans and advances to customers (48,349) 48,349 n/a
---------------------- --------------------------- ----------------------
Credit losses of other financial
instruments (3,814) 3,814 n/a
---------------------- --------------------------- ----------------------
Credit losses on financial assets n/a (52,163) (52,163)
---------------------- --------------------------- ----------------------
(52,163) - (52,163)
---------------------- --------------------------- ----------------------
Turnover 391,367 (743) 390,624
---------------------- --------------------------- ----------------------
Reclassifications within the Consolidated Balance Sheet
Investments are now presented by class on the face of the consolidated
balance sheet and loan stock is now presented in separate lines by
type of liability issued.
31 December Reclassifications 31 December
2021 2021
(as previously (restated)
presented)
Assets EUR000 EUR000 EUR000
---------------------- --------------------------- --------------------
Investments 879,005 (879,005) n/a
---------------------- --------------------------- --------------------
Investments pledged as collateral 1,260,158 (1,260,158) n/a
---------------------- --------------------------- --------------------
Investments at FVPL n/a 199,194 199,194
---------------------- --------------------------- --------------------
Investments at FVOCI n/a 748,695 748,695
---------------------- --------------------------- --------------------
Investments at amortised cost n/a 1,191,274 1,191,274
---------------------- --------------------------- --------------------
2,139,163 - 2,139,163
---------------------- --------------------------- --------------------
Liabilities
---------------------- --------------------------- --------------------
Loan stock 642,775 (642,775) n/a
---------------------- --------------------------- --------------------
Debt securities in issue n/a 302,555 302,555
---------------------- --------------------------- --------------------
Subordinated loan stock n/a 340,220 340,220
---------------------- --------------------------- --------------------
642,775 - 642,775
---------------------- --------------------------- --------------------
The Consolidated Statement of Cash Flows for the six months ended
30 June 2021 as well as respective notes were restated to reflect
the changes in the presentation of the Consolidated Income Statement
and Consolidated Balance Sheet described above.
3.2 Statement of compliance
The Consolidated Financial Statements have been prepared in accordance
with the International Accounting Standard (IAS) applicable to interim
financial reporting as adopted by the European Union (EU) (IAS 34),
the Transparency (Directive 2004/109/EC) Regulations 2007, as amended,
Part 2 (Transparency Requirements) of the Central Bank (Investment
Market Conduct) Rules 2019 and the applicable requirements of the
Disclosure Guidance and Transparency Rules of the UK's Financial
Conduct Authority.
The Consolidated Financial Statements do not comprise statutory financial
statements for the purposes of the Companies Act 2014 of Ireland.
The Company's statutory financial statements for the purposes of
Chapter 4 of Part 6 of the Companies Act 2014 of Ireland for the
year ended 31 December 2021, upon which the auditors have expressed
an unqualified opinion, were published on 29 March 2022 and are expected
to be delivered to the Registrar of Companies of Ireland within 56
days from 30 September 2022.
The Consolidated Financial Statements do not include all the information
and disclosures required for the annual financial statements and
should be read in conjunction with the Annual Consolidated Financial
Statements of Bank of Cyprus Holdings Group for the year ended 31
December 2021, prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU and ESEF requirements,
which are available at the Group's website (www.bankofcyprus.com).
3.3 Changes in accounting policies, presentation and disclosures
The accounting policies adopted are consistent with those followed
for the preparation of the annual consolidated financial statements
for the year ended 31 December 2021, except for the adoption of new
and amended standards and interpretations as explained in Note 3.3.1.
3.3.1 New and amended standards and interpretations
The Group applied for the first time certain standards and amendments,
which are effective for annual periods beginning on or after 1 January
2022 and which are explained below. The Group has not early adopted
any other standard, interpretation or amendment that has been issued
but is not yet effective.
New and amended standards and Interpretations effective from 1 January
2022
IFRS 16: Leases COVID--19--Related Rent Concessions beyond 30 June
2021 (amendment)
The amendment increases the scope of COVID--19--related rent concessions
(amendment to IFRS 16 issued in May 2020), which provides lessees
with an exemption from assessing whether rent concessions that occur
as a direct consequence of the COVID--19 pandemic and meet specified
conditions are lease modifications and, instead, to account for those
rent concessions as if they were not lease modifications. The amendment
increased the eligibility period for the application of the exemption
by 12 months from 30 June 2021 to 30 June 2022.
IFRS 3: Business Combinations (amendments)
The IASB has published 'Reference to the Conceptual Framework (Amendments
to IFRS 3)' with amendments to IFRS 3 'Business Combinations' that
update an outdated reference in IFRS 3 without significantly changing
the accounting requirements for business combinations.
IAS 16: Property, Plant and Equipment - Proceeds before Intended
Use (amendments)
The amendments to the standard prohibit an entity from deducting
from the cost of an item of property, plant and equipment any proceeds
from selling items produced while bringing that asset to the location
and condition necessary for it to be capable of operating in the
manner intended by management. Instead, an entity recognises the
proceeds from selling such items, and the cost of producing those
items, in profit or loss.
IAS 37: Provisions, Contingent Liabilities and Contingent Assets
- Onerous Contracts - Cost of Fulfilling a Contract (amendments)
The changes in Onerous Contracts - Cost of Fulfilling a Contract
specify that the 'cost of fulfilling' a contract comprises the 'costs
that relate directly to the contract'. Costs that relate directly
to a contract can either be incremental costs of fulfilling that
contract (examples would be direct labour, materials) or an allocation
of other costs that relate directly to fulfilling contracts (an example
would be the allocation of the depreciation charge for an item of
property, plant and equipment used in fulfilling the contract).
Annual Improvements to IFRS Standards 2018-2020 Cycle
Annual Improvements to IFRS Standards 2018-2020 Cycle makes amendments
to the following standards:
* IFRS 1 First time Adoption of International Financial
Reporting Standards: the amendment permits a
subsidiary that applies IFRS 1 to measure cumulative
translation differences using the amounts reported by
its parent, based on the parent's date of transition
to IFRSs.
* IFRS 9 Financial Instruments: the amendment clarifies
which fees an entity includes when it applies the '10
per cent' test of IFRS 9 in assessing whether to
derecognise a financial liability. An entity includes
only fees paid or received between the entity (the
borrower) and the lender, including fees paid or
received by either the entity or the lender on the
other's behalf.
* IFRS 16 Leases: the amendment to Illustrative Example
13 accompanying IFRS 16 removes from the example the
illustration of the reimbursement of leasehold
improvements by the lessor in order to resolve any
potential confusion regarding the treatment of lease
incentives that might arise because of how lease
incentives are illustrated in that example.
* IAS 41 Agriculture: the amendment removes the
requirement of IAS 41 for entities to exclude
taxation cash flows when measuring the fair value of
a biological asset using a present value technique,
which ensures consistency with the requirements in
IFRS 13.
These amendments and the annual improvements to IFRS Standards Cycle
did not have a significant impact on the Group during the six months
ended 30 June 2022.
3.3.2 Standards and Interpretations that are issued but not yet effective
IFRS 17, an accounting standard that will be effective from 1 January
2023, impacts the phasing of profit recognition for insurance contracts.
Upon implementation, the Group's insurance--related retained earnings
will be restated and the reporting of insurance new business revenue
will be spread over time, as the Group provides service to its policyholders
(versus recognised up front under current accounting standards),
with the quantum and timing of the impact dependent on, inter alia,
the amount and mix of new business and extent of assumption changes
in any given year following implementation. IFRS 17 requires a number
of key changes compared with current accounting policies for insurance.
* Under IFRS 17, there will be no present value of
in--force insurance contracts ('PVIF') asset
recognised. Instead, the estimated future profit will
be included in the measurement of the insurance
contract liability as the contractual service margin
('CSM') and this will be gradually recognised in
revenue as services are provided over the duration of
the insurance contract. While the profit over the
life of an individual contract will be unchanged, its
emergence will be later under IFRS 17.
* IFRS 17 requires the increased use of current market
values in the measurement of insurance assets and
liabilities hence insurance liabilities and related
assets will be adjusted to reflect IFRS 17
measurement requirements.
* In accordance with IFRS 17, directly attributable
costs will be incorporated in the CSM and, as
recognised, will be presented as a deduction to
reported revenue. This will result in a reduction in
operating expenses.
The Group continues to make progress on the implementation of IFRS
17 and preliminary management estimate on the initial impact is as
previously communicated and included below. However, industry practice
and interpretation of the standard are still developing, hence uncertainty
remains as to the final transition impact. Additionally, the impact
on the forecast future returns of the Group's insurance business
is dependent on the growth, duration and composition of its insurance
contract portfolio. These estimates are therefore subject to change
in the period up to adoption of the standard.
The accounting changes for the purposes of planning the Group's financial
resources, are initially estimated to result in:
a) the removal of value in force from the insurance business (including
associated deferred tax liability) of approximately EUR105 million
as per the Group's consolidated balance sheet as at 30 June 2022,
which will reduce Group accounting equity by a respective amount
(with no impact on the Group regulatory capital or tangible equity),
and
b) the remeasurement of insurance assets and liabilities and the
creation of a contractual service margin (CSM) liability which will
increase both the insurance business' and the Group's equity by an
amount of approximately EUR50 million, predominantly relating to
the life business of the Group.
The adoption of IFRS 17 may result in a modest annual negative impact
on the contribution to profits of the Group's insurance business
in the near term which has been incorporated in the Group business
plan.
Minor amendments to other accounting standards
The IASB has issued a number of minor amendments to IFRSs effective
1 January 2023 (including IAS 1 Presentation of Financial Statements,
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors,
IAS 12 Income Taxes). These amendments are not expected to have a
significant impact on the Group.
4. Going concern
The Directors have made an assessment of the Group's ability to continue
as a going concern for a period of 12 months from the date of approval
of these Consolidated Financial Statements.
The Directors have concluded that there are no material uncertainties
which would cast significant doubt over the ability of the Group,
the Company and BOC PCL to continue to operate as a going concern
for a period of 12 months from the date of approval of these Consolidated
Financial Statements.
In making this assessment, the Directors have considered a wide range
of information relating to present and future conditions, including
projections of profitability, cash flows, capital requirements and
capital resources, taking also into consideration, the Group's Financial
Plan approved by the Board in February 2022 (the 'Plan') and Reforecast
exercises run and the operating environment. The Group has sensitised
its projection to cater for a downside scenario and has used reasonable
economic inputs to develop its medium term strategy. The Group is
working towards materialising its Strategy.
Capital
The Directors and Management have considered the Group's forecasted
capital position, including the potential impact of a deterioration
in economic conditions. The Group has developed capital projections
under base and adverse scenario and the Directors believe that the
Group has sufficient capital to meet its regulatory capital requirements
throughout the period of assessment.
Funding and liquidity
The Directors and Management have considered the Group's funding
and liquidity position and are satisfied that the Group has sufficient
funding and liquidity throughout the period of assessment. The Group
continues to hold a significant liquidity buffer at 30 June 2022
that can be easily and readily monetised in a period of stress.
5. Economic and geopolitical environment
The Group assessed the financial impacts of the economic environment
through the Group's planning process and believes that it is reasonably
well positioned to withstand volatility from a resurgence of the
virus, the war in Ukraine and the sanctions on Russia or other exogenous
adverse shocks, particularly given the Group's continued management
of its financial position and capital management.
The current geopolitical upheaval caused by the Russian invasion
in Ukraine has resulted in the deterioration of the macroeconomic
outlook for the European and Cyprus economy, which are now confronted
with an increase in inflation. The continuation of, or any further
escalation in, the Russia--Ukraine war could have additional economic,
social and political consequences. These include further sanctions
and trade restrictions, longer--term changes in the macroeconomic
environment with the risk of higher and sustained inflation, and
a continued increase in energy prices. The effects of these developments,
such as the cost and sufficiency of energy supplies in Europe and
the economic impact of various scenarios, are hard to predict and
could be significant. The implications of Russia's ongoing war in
Ukraine, including higher energy and commodity prices, as well as
the continuing effects of the pandemic have increased uncertainty
about the global and European economic outlook. In an attempt to
tame inflation the ECB has started raising rates and as a result,
financial conditions will be tightening further.
The above trends are driving high levels of uncertainty and volatility
in the markets. Management closely monitors the developments and
assesses the impact these could have on the Group's financial results
and performance.
Group's Direct exposure to Russia
Russia's invasion of Ukraine has triggered disruptions and uncertainties
in the markets and the global economy, as well as the coordinated
implementation of sanctions by the EU, the UK and the U.S., joined
by several other countries, imposed against Russia, Belarus and certain
regions of Ukraine and certain Russian entities and nationals. The
Group's policy is to comply with all applicable laws, including sanctions
and export controls.
Overall, the Group's direct exposure to Russia, Ukraine and Belarus
remains limited and has been further reduced since December 2021.
The Group's direct gross lending risk exposure to Russia, Ukraine
and Belarus (including loans and advances to customers classified
as held for sale) was approximately EUR112 million (31 December 2021:
EUR119 million) with a net book value of EUR108 million (31 December
2021: EUR110 million) across its business divisions as at 30 June
2022. Out of the gross exposures outlined above EUR95 million (31
December 2021: EUR95 million) were classified as performing (the
basis of the exposure is expanded compared to the country risk exposure
as included in Note 29.2 of the Consolidated Financial Statements
which is disclosed by reference to the country of residency/country
of registration, to also include exposures for loans and advances
to customers with passport of origin in these countries and/or business
activities within these countries and/or where the UBO has passport
of origin or residency in these countries). Customer deposits related
to Russian/Ukrainian customers are disclosed in Note 21 of the Consolidated
Financial Statements.
Further, the Group had Ruble denominated loans and advances to banks
of approximately EUR5 million as at 30 June 2022 (31 December 2021:
EUR1 million). The Group's investments at amortised cost included
EURO denominated debt securities of a carrying amount of EUR12 million
(31 December 2021: EUR21.7 million) relating to debt securities of
a European Union country issuer with significant exposure in Russia
and Ukraine. With respect to derivatives, it is noted that the Group
reduced its exposure in RUB denominated derivatives to nil since
March 2022. There were no other investments relating to issuers with
significant exposure to Russia and/or Ukraine. The Group's balance
sheet as at 30 June 2022 also included net assets of less than EUR1
million (31 December 2021: EUR10 million) held in the Group's Russian
subsidiary; forming part of the Group's overseas legacy operations
which are being run down.
6. Significant and other judgements, estimates and assumptions
The preparation of the Consolidated Financial Statements requires
the Company's Board of Directors and management to make judgements,
estimates and assumptions that can have a material impact on the
amounts recognised in the Consolidated Financial Statements and the
accompanying disclosures, as well as the disclosures of contingent
liabilities. Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affecting future periods.
The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities are described below. The Group based its assumptions
and estimates on parameters available when the Consolidated Financial
Statements were prepared. Existing circumstances and assumptions
about future developments may, however, change due to market changes
or circumstances beyond the control of the Group. Such changes are
reflected in the assumptions when they occur.
The most significant judgements, estimates and assumptions relate
to the classification of financial instruments and the calculation
of expected credit losses (ECL), the estimation of the net realisable
value of stock of property and the provisions for pending litigation,
claims, regulatory and other matters, which are presented in Notes
6.1 to 6.4 below. Other judgements, estimates and assumptions are
disclosed in Notes 5.5 to 5.13 of the annual consolidated financial
statements for the year ended 31 December 2021.
6.1 Classification of financial assets
The Group exercises judgement upon determining the classification
of its financial assets, which relate to business models and future
cash flows.
Judgement is also required to determine the appropriate level at
which the assessment of business models needs to be performed. In
general, the assessment for the classification of financial assets
into the business models is performed at the level of each business
line. Further, the Group exercises judgement in determining the effect
of sales of financial instruments on its business model assessment.
The Group also applies judgement upon considering whether contractual
features including interest rate could significantly affect future
cash flows. Furthermore, judgement is required when assessing whether
compensation paid or received on early termination of lending arrangements
results in cash flows that are not SPPI.
6.2 Calculation of expected credit losses
The calculation of ECL requires management to apply significant judgement
and make estimates and assumptions, involving significant uncertainty
at the time these are made. Changes to these estimates and assumptions
can result in significant changes to the timing and amount of ECL
to be recognised. The Group's calculations are outputs of models,
of underlying assumptions on the choice of variable inputs and their
interdependencies.
It has been the Group's policy to regularly review its models in
the context of actual loss experience and adjust when necessary.
Elements of ECL models that are considered accounting judgements
and estimates include:
Assessment of significant increase in credit risk (SICR)
IFRS 9 does not include a definition of significant increase in credit
risk. The Group assesses whether significant increase in credit risk
has occurred since initial recognition using predominantly quantitative
and in certain cases qualitative information. The determination of
the relevant thresholds to determine whether a significant increase
in credit risk has occurred, is based on statistical metrics and
could be subject to management judgement. The relevant thresholds
are set, monitored and updated on a yearly basis by the Risk Management
Division and endorsed by the Group Provisions Committee.
Determining the probability of default (PD) at initial recognition
requires management estimates in particular cases. Specifically in
the case of exposures existing prior to the adoption of IFRS 9, a
retrospective calculation of the PD is made in order to quantify
the risk of each exposure at the time of the initial recognition.
In certain cases estimates about the date of initial recognition
might be required.
For the retail portfolio, the Group uses a PD at origination incorporating
behavioural information (score cards) whereas, for the corporate
portfolio, the Group uses the internal credit rating information.
For revolving facilities, management estimates are required with
respect to the life--time and hence a behavioural maturity model
is utilised, assigning an expected maturity based on product and
customer behaviour.
Scenarios and macroeconomic factors
The Group determines the ECL, which is a probability weighted amount,
by evaluating a range of possible outcomes. Management uses forward
looking scenarios and assesses the suitability of weights used. These
are based on management's assumptions taking into account macroeconomic,
market and other factors. Changes in these assumptions and in other
external factors could significantly impact ECL. Macroeconomic inputs
and weights per scenario are monitored by the Economic Research Department
and are based on internal model analysis after considering external
market data supplemented by expert judgement.
Economic activity surprised to the upside in the first quarter of
2022, driven by higher tourist arrivals and the continuing expansion
of other services exports. Arrivals of tourists increased considerably
in the first half of the year and reached around 75% of pre--pandemic
levels. The outlook for the second half of the year remains positive
despite the loss of Russian tourists that accounted for about 22%
of total arrivals in 2016--19. The economic fallout of the war in
Ukraine and Western sanctions on Russia will impact negatively on
the economy in the second half. The Cypriot economy is expected to
expand by 3.2% in 2022 according to the European Commission's summer
forecasts. This follows a strong recovery in 2021 when real GDP increased
by 5.6%. Over the medium term, prospects are aided by the Recovery
and Resilience Fund of Next Generation EU. Its purpose is ultimately
about the future, to help fund the key investments that will be needed
for the green and digital transitions, and so enhance the potential
and economic resilience of member states. Structural reform is an
integral part of this process, and ultimately a critical factor that
will determine the effectiveness of the investments. The bulk of
the funds will be released in 2022--2024 depending on the strict
implementation of reform priorities agreed with the EU. These include
increasing the efficiency of public and local administrations, improving
the government of state--owned enterprises, reducing further the
levels of non--performing loans in the banking sector, improving
the efficiency of the judicial system and accelerating anti--corruption
reforms.
However, prospects are clouded by the war in Ukraine and sanctions
on Russia. The continuing supply disruptions and the energy crisis
that result from it, sustain higher inflation for longer than initially
anticipated forcing central banks to reverse their policies and raise
interest rates. Aggressive monetary policies in turn, raise interest
rates and risk a debt crisis in countries with a high debt and political
instability.
There have been distinct improvements in Cyprus' risk profile, but
substantial risks remain in terms of the domestic operating environment,
as well as the external environment on which it depends. Cyprus'
overall country risk is a combination of sovereign, currency, banking,
political and economic structure risk, including external developments
with substantial potential impact on the domestic economy. The large
stock of public debt weighs heavily on Cyprus' sovereign credit risk.
In the banking sector, despite significant progress since the financial
crisis of 2012--2014, risks remain elevated and non--performing loans
were 11.4% of gross loans at the end of March 2022 compared to a
Euro area average of just over 2%. Cyprus has a large and relatively
undiversified export base. While the current account deficit will
be narrowing as exports services recover in the medium--term, it
will remain sizable. Rising inflation and higher interest rates will
be causing a significant slowing of economic activity in the quarters
ahead. The extent of the crisis in Ukraine can lead in elevated tensions
for a considerable period of time.
For the ECL, the Group updated its forward looking scenarios, factoring
in updated macroeconomic assumptions and other monetary and fiscal
developments at the national and the EU level based on developments
and events as at the reporting date, i.e. 30 June 2022.
The tables below indicate the most significant macroeconomic variables
as well as the scenarios used by the Group as at 30 June 2022 and
31 December 2021 respectively. The Group uses three different economic
scenarios in the calculation of default probabilities and provisions.
The Group has used the 30--50--20 probability structure for the adverse,
base and favourable scenarios respectively compared to the 25--50--25
structure derived using the method described in Note 2.19.5 of the
annual consolidated financial statements for the year ended 31 December
2021. This reflects the management's view of specific characteristics
of the Cyprus economy that render it more vulnerable to external
and internal shocks. Given added uncertainties and elevated risks
during 2022--2023, especially in view of inflation uncertainties
and added geopolitical risks, management decided to maintain an elevated
weight on the adverse scenario.
The economy continues to face financial and macroeconomic risks,
including a high public debt ratio and a relatively high level of
NPEs that together maintain elevated vulnerabilities and limit the
policy reaction space thus sustaining conditions, which can lead
to a deeper recession in response to shocks than under normal times.
Adverse developments and exogenous shocks, that result in significantly
slower growth can lead to a rapid increase in the creation of non--performing
loans and weaken bank balance sheets.
These factors and the overall risk profile discussed earlier in this
section, including economic structure risk given a very large external
sector and high concentration to geographical areas render the economy
more susceptible to external shocks and weaken its resilience. This
may, in management's view, not be fully captured in the weights as
calculated using the method described in Note 2.19.5 of the annual
consolidated financial statements for the year ended 31 December
2021. Hence management has decided to keep the weight of the adverse
scenario to 30%, and correspondingly keep a reduced weight of the
favourable scenario to 20%.
30 June 2022
Year Scenario Weight Real GDP Unemployment Consumer RICS House
% (% change) rate (% of Price Index Price Index
labour force) (average (average
% change) % change)
2022 Adverse 30.0 0.6 6.4 7.3 0.4
------------ ------------------ ----------------- -------------- -------------- ------------
Baseline 50.0 2.7 6.2 7.8 2.6
------------------------- ------------------ ----------------- -------------- -------------- ------------
Favourable 20.0 3.2 6.0 8.2 2.8
------------------------- ------------------ ----------------- -------------- -------------- ------------
2023 Adverse 30.0 --1.8 7.1 1.6 --0.6
------------ ------------------ ----------------- -------------- -------------- ------------
Baseline 50.0 3.0 6.3 3.3 2.8
------------------------- ------------------ ----------------- -------------- -------------- ------------
Favourable 20.0 3.3 5.7 3.6 3.0
------------------------- ------------------ ----------------- -------------- -------------- ------------
2024 Adverse 30.0 0.8 7.3 0.7 0.0
------------ ------------------ ----------------- -------------- -------------- ------------
Baseline 50.0 3.2 6.1 2.1 2.8
------------------------- ------------------ ----------------- -------------- -------------- ------------
Favourable 20.0 3.3 5.5 2.2 3.0
------------------------- ------------------ ----------------- -------------- -------------- ------------
2025 Adverse 30.0 1.9 7.0 1.4 1.2
------------ ------------------ ----------------- -------------- -------------- ------------
Baseline 50.0 2.8 5.7 2.2 2.9
------------------------- ------------------ ----------------- -------------- -------------- ------------
Favourable 20.0 2.9 5.2 2.2 3.0
------------------------- ------------------ ----------------- -------------- -------------- ------------
2026 Adverse 30.0 3.4 5.8 2.2 3.2
------------ ------------------ ----------------- -------------- -------------- ------------
Baseline 50.0 2.7 5.4 2.0 2.9
------------------------- ------------------ ----------------- -------------- -------------- ------------
Favourable 20.0 2.5 4.8 2.1 2.7
------------------------- ------------------ ----------------- -------------- -------------- ------------
31 December 2021
Year Scenario Weight Real GDP Unemployment Consumer RICS House
% (% change) rate (% of Price Index Price Index
labour force) (average (average
% change) % change)
2022 Adverse 30.0 --0.4 7.6 0.5 --3.7
------------ ------------------ ----------------- -------------- -------------- ---------------
Baseline 50.0 4.3 6.5 2.2 2.6
------------------------- ------------------ ----------------- -------------- -------------- ---------------
Favourable 20.0 4.5 5.8 3.0 3.1
------------------------- ------------------ ----------------- -------------- -------------- ---------------
2023 Adverse 30.0 0.1 7.7 1.6 --1.0
------------ ------------------ ----------------- -------------- -------------- ---------------
Baseline 50.0 3.3 6.4 1.6 3.3
------------------------- ------------------ ----------------- -------------- -------------- ---------------
Favourable 20.0 3.3 5.8 1.6 4.0
------------------------- ------------------ ----------------- -------------- -------------- ---------------
2024 Adverse 30.0 1.8 7.6 1.8 3.0
------------ ------------------ ----------------- -------------- -------------- ---------------
Baseline 50.0 3.0 6.2 1.8 3.1
------------------------- ------------------ ----------------- -------------- -------------- ---------------
Favourable 20.0 3.2 5.7 1.8 3.2
------------------------- ------------------ ----------------- -------------- -------------- ---------------
2025 Adverse 30.0 2.4 7.2 1.9 3.3
------------ ------------------ ----------------- -------------- -------------- ---------------
Baseline 50.0 2.9 5.8 1.9 3.0
------------------------- ------------------ ----------------- -------------- -------------- ---------------
Favourable 20.0 3.0 5.5 1.9 2.9
------------------------- ------------------ ----------------- -------------- -------------- ---------------
2026 Adverse 30.0 3.0 6.7 1.8 3.2
------------ ------------------ ----------------- -------------- -------------- ---------------
Baseline 50.0 2.7 5.3 1.8 2.7
------------------------- ------------------ ----------------- -------------- -------------- ---------------
Favourable 20.0 2.6 5.1 1.8 3.1
------------------------- ------------------ ----------------- -------------- -------------- ---------------
The adverse scenarios may outpace the base and favourable scenarios
after the initial shock has been adjusted to and the economy starts
to expand from a lower base. Thus, in the adverse scenario GDP will
follow a growth trajectory that will ultimately equal and surpass
the baseline before converging. Property prices are determined by
multiple factors with GDP growth featuring prominently. However,
the relationship between GDP growth and property prices entails a
lag. Thus, property prices will initially adjust less steeply than
GDP, and will start to accelerate after the recovery in GDP has been
entrenched. After this point, property prices will accelerate and
will match and surpass the pace in the baseline scenario, before
finally converging.
The baseline scenario was updated for 30 June 2022 reporting, considering
available information and relevant developments until that date.
In the baseline, real GDP is forecast to expand by 2.7% in 2022 and
inflation will rise by 7.8% compared with 2.3% in 2021. The unemployment
rate will continue to drop steadily in the medium term. Property
prices will continue to rise modestly in 2022 as domestic demand
for housing picks up.
The adverse scenario is consistent with assumptions for continued
supply disruptions and the war in Ukraine also continuing. The impact
of higher inflation and tighter monetary policy on the economy will
be more severe than under the baseline scenario. The Cypriot economy
relies on tourism and other services exports. This makes the economy
more exposed than other countries to travel restrictions and the
external environment. Developments with Russia over the Ukrainian
crisis and subsequent sanctions, lead to negative implications for
tourism travel, investment flows and energy prices. The hit to the
Cyprus economy from falling external demand for travel and tourism
services and the knock--on effects to related sectors will be significantly
more severe than under the baseline scenario. Real GDP is expected
to slow sharply in the second half of the year, under the adverse
scenario and average a 0.6% annual growth. The economy falls into
recession in the second half which deepens in 2023 with real GDP
contracting by 1.8%. Economic recovery will remain weak in the medium
term. In the labour market the unemployment rate will remain stuck
near the 2021 levels at 6.4% in 2022 and to rise modestly to 7.1%
in 2023 under the adverse scenario.
Since 1 January 2018, the Group has reassessed the key economic variables
used in the ECL models consistent with the implementation of IFRS
9. The Group uses actual values for the input variables. These values
are sourced from the Cyprus Statistical Service, the Eurostat, the
Central Bank of Cyprus for the residential property price index,
and the European Central Bank for interest rates. Interest rates
are also sourced from Bloomberg. In the case of property prices the
Group additionally uses data from the Royal Institute of Chartered
Surveyors. For the forward reference period, the Group uses the forecast
values for the same variables, as prepared by the Bank's Economic
Research Department. The results of the internal forecast exercises
are consistent with publicly available forecasts from official sources
including the European Commission, the International Monetary Fund,
the European Central Bank and the Ministry of Finance of the Republic
of Cyprus.
Qualitative adjustments or overlays are occasionally made when inputs
calculated do not capture all the characteristics of the market.
These are reviewed and adjusted, if considered necessary, by the
Risk Management Division and endorsed by the Group Provisions Committee.
Qualitative adjustments or overlays were applied to the positive
future property value growth to restrict the level of future property
price growth to 0% for all scenarios for loans and advances to customers
which are secured by property collaterals.
The RICS indices, which are considered for the purposes of determining
the real estate collateral value on realisation date have been used
as the basis to estimate updated market values of properties supplemented
by management judgement where necessary given the difficulty in differentiating
between short term impacts and long term structural changes and the
shortage of market evidence for comparison purposes and are capped
to 0% in case of any future projected increase, whereas any future
projected decrease is taken into account.
For Stage 3 customers, the calculation of individually assessed provisions
is the weighted average of three scenarios: base, adverse and favourable.
The base scenario focuses on the following variables, which are based
on the specific facts and circumstances of each customer: the operational
cash flows, the timing of recovery of collaterals and the haircuts
from the realisation of collateral. The base scenario is used to
derive additional either more favourable or more adverse scenarios.
Under the adverse scenario operational cash flows are decreased by
50%, applied haircuts on real estate collateral are increased by
50% and the timing of recovery of collaterals is increased by 1 year
with reference to the baseline scenario, whereas under the favourable
scenario applied haircuts are decreased by 5%, with no change in
the recovery period with reference to the baseline scenario. Assumptions
used in estimating expected future cash flows (including cash flows
that may result from the realisation of collateral) reflect current
and expected future economic conditions and are generally consistent
with those used in the Stage 3 collectively assessed exposures.
For collectively assessed customers the calculation is also the weighted
average of three scenarios: base, adverse and favourable.
Assessment of loss given default (LGD)
A factor for the estimation of loss given default (LGD) is the timing
and net recoverable amount from repossession or realisation of collaterals
which mainly comprise real estate assets.
Assumptions have been made about the future changes in property values,
as well as the timing for the realisation of collateral, taxes and
expenses on the repossession and subsequent sale of the collateral
as well as any other applicable haircuts. Indexation has been used
as the basis to estimate updated market values of properties supplemented
by management judgement where necessary given the difficulty in differentiating
between short term impacts and long term structural changes and the
shortage of market evidence for comparison purposes. Assumptions
were made on the basis of a macroeconomic scenario for future changes
in property prices, and these are capped to zero for all scenarios,
in case of any future projected increase, whereas any future projected
decrease is taken into consideration.
At 30 June 2022, the weighted average haircut (including liquidity
haircut and selling expenses) used in the collectively assessed provisions
calculation for loans and advances to customers is approximately
32% under the baseline scenario (31 December 2021: approximately
32%) excluding those classified as held for sale.
The timing of recovery from real estate collaterals used in the collectively
assessed provisions calculation for loans and advances to customers
has been estimated to be on average seven years under the baseline
scenario (31 December 2021: average of seven years), excluding those
classified as held for sale.
For the calculation of individually assessed provisions, the timing
of recovery of collaterals as well as the haircuts used are based
on the specific facts and circumstances of each case. For specific
cases judgement may also be exercised over staging during the individual
assessment including cases where no specific model has been developed.
The above assumptions are also influenced by the ongoing regulatory
dialogue the Group maintains with its lead regulator, the ECB, and
other regulatory guidance and interpretations issued by various regulatory
and industry bodies such as the ECB and the EBA, which provide guidance
and expectations as to relevant definitions and the treatment/classification
of certain parameters/assumptions used in the estimation of provisions.
Any changes in these assumptions or a variance between assumptions
made and actual results could result in significant changes in the
amount of required credit losses of loans and advances to customers.
Expected lifetime of revolving facilities
The expected lifetime of revolving facilities is based on a behavioural
maturity model for revolving facilities based on BOC PCL's available
historical data, where an expected maturity for each revolving facility
based on the customer's profile is assigned.
The credit conversion factor model for revolving products was calibrated
in the fourth quarter of 2021, to include additional data points
covering the period up to moratorium and in order to be aligned with
the behavioural maturity model for revolving facilities with impact
on the ECL for the year ended 31 December 2021 being a release of
EUR1,790 thousand. The behavioural model was updated in the second
quarter of 2022 to reflect customers profile whilst maintaining the
same model components. The impact on the ECL for the six months ended
30 June 2022 was a charge of ECL of EUR66 thousand.
Modelling adjustments
Forward looking models have been developed for ECL parameters PD,
EAD, LGD for all portfolios and segments sharing similar characteristics.
Model validation (initial and periodic) is performed by the independent
validation unit within the Risk Management Division and involves
assessment of a model under both quantitative (i.e. stability and
performance) and qualitative terms. The frequency and level of rigour
of model validation is commensurate to the overall use, complexity
and materiality of the models, (i.e. risk tiering). In certain cases,
judgement is exercised in the form of management overlay by applying
adjustments on the modelled parameters. Governance of these models
lies with the Risk Management Division, where a strong governance
process is in place around the determination of the impairment measurement
methodology including inputs, assumptions and overlays. Any management
overlays are prepared by the Risk Management Division, endorsed by
the Provisions Committee and approved by the joint Risk and Audit
Committee.
ECL allowances also include off--balance sheet credit exposures represented
by guarantees given and by irrevocable commitments to disburse funds.
Off--balance sheet credit exposures of the individually assessed
assets require assumptions on the probability, timing and amount
of cash outflows. For the collectively assessed off--balance sheet
credit exposures, the allowance for provisions is calculated using
the Credit Conversion Factor (CCF) model.
During the third quarter of 2021, cure model recalibration was performed
mainly to address the low default/cure environment observed in the
recent period prior to moratorium and investigate the considered
model development period such that is retains the through the cycle
nature of the model. The calibration was performed on the most recent
changes in definition of default introduced in January 2021 and had
an ECL impact of EUR28 million for the year ended 31 December 2021.
In the second quarter of 2022, following the agreement for the disposal
of Helix 3 portfolio, cure model was updated, assigning maximum cure
period for an exposure of 3 years instead of 5 years from their default
date. This had an ECL impact of EUR1.8 million for the six months
ended 30 June 2022.
Overlays in the context of COVID--19 and current economic conditions
COVID--19 related management overlays applied in 2020 and up to the
first six months of 2021 were removed in the third quarter of 2021,
except for the overlay for exposures in the hotel and catering (which
applied stricter customer's credit ratings thresholds for customers
in this industry sector) that was removed in the second quarter of
2022 following the introduction of the new overlays described below.
The impact on the ECL, from the removal of the overlay, was a release
of EUR152 thousand and a transfer of EUR52 million loans from Stage
2 to Stage 1 as at 30 June 2022.
During 2022, the Group has enhanced provisioning for exposures that
could be impacted from the consequences of the Ukrainian crisis,
by establishing two new overlays in the collectively assessed population,
to address the increased uncertainties from the geopolitical instability,
trade restrictions, disruptions in the global supply chains, increases
in the energy prices and their potential negative impact in the domestic
cost of living. The impact on the ECL from the application of these
overlays was approximately EUR8.4 million charge for the six months
ended 30 June 2022 and a transfer of EUR115 million loans from Stage
1 to Stage 2 as at 30 June 2022.
Specifically, the first overlay is related to private individuals
that are expected to be affected by the increased cost of living
in order to reflect the future vulnerabilities to inflation, where
a scenario with higher percentage increase is applied for the cost
of living. The second overlay related to sectors that have been classified
as high risk (Transportation) or Early Warning (Trade, Hotels and
catering, Construction, Real Estate and Other sectors such as Electricity
and Mining) to reflect the expected Gross Value Added (GVA) outlook
of these sectors, where this has deteriorated. Specifically, the
sector risk classification is carried out by comparing the projected
GVA outlook of each sector with its past performance (intrinsic)
and its performance vis--a--vis other sectors (systemic). In cases
where both systemic and intrinsic indicators are found to have deteriorated,
the relevant sector is classified as 'High Risk', whereas if only
one of the two has deteriorated, then the sector is classified as
'Early Warning'.
The Group has exercised critical judgement on a best effort basis,
to consider all reasonable and supportable information available
at the time of the assessment of the ECL allowance as at 30 June
2022. The Group will continue to evaluate the ECL allowance and the
related economic outlook each quarter, so that any changes arising
from the uncertainty on the macroeconomic outlook and geopolitical
developments, impacted by the implications of the Russian invasion
of Ukraine, as well as the degree of recurrence of the COVID--19
pandemic due to virus mutations, are timely captured.
Portfolio segmentation
The individual assessment is performed not only for individually
significant exposures but also for other exposures meeting specific
criteria determined by management. The selection criteria for the
individually assessed exposures are based on management judgement
and are reviewed on a quarterly basis by the Risk Management Division
and are adjusted or enhanced, if deemed necessary. The selection
criteria were further enhanced during the six months ended 30 June
2022 to include significant exposures to customers with passport
of origin or residency in Russia, Ukraine or Belarus and/or business
activity within these countries.
Further details on impairment allowances and related credit information
are set out in Note 29.
6.3 Stock of property -- estimation of net realisable value
Stock of property is measured at the lower of cost and net realisable
value. The net realisable value is determined through valuation techniques,
requiring significant judgement, taking into account all available
reference points, such as expert valuation reports, current market
conditions, the holding period of the asset, applying an appropriate
illiquidity discount where considered necessary, and any other relevant
parameters. Selling expenses are deducted from the realisable value.
Depending on the value of the underlying asset and available market
information, the determination of costs to sell may require professional
judgement which involves a high degree of uncertainty due to the
relatively low level of market activity.
More details on the stock of property are presented in Note 17.
6.4 Provisions for pending litigation, claims, regulatory and other matters
The accounting policy for provisions for pending litigation, claims,
regulatory and other matters is described in Note 2.36 of the annual
consolidated financial statements for the year ended 31 December
2021. Judgement is required in determining whether a present obligation
exists and in estimating the probability, timing and amount of any
outflows. Provisions for pending litigation, claims, regulatory and
other matters usually require a higher degree of judgement than other
types of provisions. It is expected that the Group will continue
to have a material exposure to litigation and regulatory proceedings
and investigations relating to legacy issues in the medium term.
The matters for which the Group determines that the probability of
a future loss is more than remote will change from time to time,
as will the matters as to which a reliable estimate can be made and
the possible loss for such matters can be estimated. Actual results
may prove to be significantly higher or lower than the estimated
possible loss in those matters, where an estimate was made. In addition,
loss may be incurred in matters with respect to which the Group believed
the probability of loss was remote.
For a detailed description of the nature of uncertainties and assumptions
and the effect on the amount and timing of pending litigation, claims,
regulatory and other matters refer to Note 25.
7. Segmental analysis
The Group's activities are mainly concentrated in Cyprus. Cyprus
operations are organised into operating segments based on the line
of business. As from 2021, the results of the overseas activities
of the Group, namely Greece, Romania and Russia are presented within
segment 'Other', given the size of these operations which are in
a run--down mode in the last years. Further, the results of certain
small subsidiaries of the Group are allocated to the segments based
on their key activities.
The operating segments are analysed below:
* The Corporate, Small and medium--sized enterprises
and Retail business lines are managing loans and
advances to customers. Categorisation of loans per
customer group is detailed below.
* Large and International corporate business line
(previously 'Global corporate') is managing loans and
advances to customers within the large corporate
section, the Shipping centre, the International
Corporate Lending, the International Syndicate and
Project Finance.
* Restructuring and recoveries is the specialised unit
which was set up to tackle the Group's loan portfolio
quality and manages exposures to borrowers in
distress situation through innovative solutions.
* International banking services specialises in the
offering of banking services to the international
corporate and non--resident individuals, particularly
international business companies whose ownership and
business activities lie outside Cyprus.
* Wealth management oversees the provision of private
banking and wealth management, Market execution and
Custody along with Asset Management and Investment
Banking. The business line Wealth management also
includes subsidiary companies of the Group, whose
activities relate to investment banking and brokerage,
investment holding and management, administration and
safekeeping of UCITS units.
* The Real Estate Management Unit manages properties
acquired through debt--for--property swaps and
properties acquired through the acquisition of
certain operations of Laiki Bank in 2013, and
executes exit strategies in order to monetise these
assets. The business line REMU also includes other
subsidiary property companies of the Group.
* Treasury is responsible for liquidity management and
for overseeing operations to ensure compliance with
internal and regulatory liquidity policies and
provide direction as to the actions to be taken
regarding liquidity availability.
* The Insurance business line is involved in both life
and non--life insurance business.
* The business line 'Other' includes central functions
of BOC PCL such as finance, risk management,
compliance, legal, corporate affairs and human
resources. These functions provide services to the
operating segments. 'Other' includes also other
subsidiary companies in Cyprus (excluding the
insurance subsidiaries, property companies under REMU
and subsidiary companies under Wealth) as well as the
overseas activities of the Group.
BOC PCL broadly categorises its loans per customer group, using the
following customer sectors:
* Retail - all physical person customers, regardless of
the facility amount, and legal entities with
facilities from BOC PCL of up to EUR260 thousand,
excluding business property loans.
* SME - any company or group of companies (including
personal and housing loans to the directors or
shareholders of a company) with facilities from BOC
PCL in the range of EUR260 thousand to EUR6 million
and a maximum annual credit turnover of EUR10
million.
* Corporate - any company or group of companies
(including personal and housing loans to the
directors or shareholders of a company) with
available credit lines with BOC PCL in excess of an
aggregate principal amount of EUR6 million or having
a minimum annual credit turnover of EUR10 million.
These companies are either local--larger corporations
or international companies or companies in the
shipping sector (lending also includes direct lending
or through syndications).
Management monitors the operating results of each business segment
separately for the purposes of performance assessment and resource
allocation. Segment performance is evaluated based on profit after
tax and non--controlling interests. Inter--segment transactions and
balances are eliminated on consolidation and are made on an arm's
length basis.
Operating segment disclosures are provided as presented to the Group
Executive Committee.
Income and expenses associated with each business line are included
for determining its performance. Transfer pricing methodologies are
applied between the business lines to present their results on an
arm's length basis. Income and expenses incurred directly by the
business lines are allocated to the business lines as incurred. Indirect
income and expenses are re--allocated from the central functions
to the business lines. For the purposes of the Cyprus analysis by
business line, notional tax at the 12.5% Cyprus tax rate is charged/credited
to profit or loss before tax of each business line.
The loans and advances to customers, the customer deposits and the
related income and expense are generally included in the segment
where the business is managed, instead of the segment where the transaction
is recorded.
Comparative information in analysis by business line analysis of
total revenue and turnover was restated to account for the changes
in the presentation of the primary statements for the six months
ended 30 June 2022 as described in Note 3.1.
Analysis by business line
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and and recoveries banking management
international medium--sized services
corporate enterprises
Six months ended 30
June 2022 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net interest
income/(expense) 28,208 30,993 14,495 43,703 16,294 10,234 578 (12,354) (27) 13,573 (2) 145,695
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net fee and
commission
income/(expense) 7,744 4,184 5,587 29,562 4,252 27,928 2,569 (90) (3,889) 1,003 14,789 93,639
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net foreign exchange
gains/(losses) 269 215 279 1,137 52 2,947 86 - - 5,809 1,104 11,898
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net gains/(losses) on
financial instrument
transactions - 171 - - (2,230) - (102) - (1,614) 1,899 (184) (2,060)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net gains/(losses) on
derecognition
of financial assets
measured at
amortised
cost 1,520 (376) (20) 116 1,523 13 (269) - - (867) 8 1,648
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Insurance income net
of claims and
commissions - - - - - - - - 32,869 - - 32,869
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net losses from
revaluation and
disposal
of investment
properties - - - - - - - (415) (307) - (650) (1,372)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Net gains on disposal
of stock of
property - - - - - - - 7,894 - - 348 8,242
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Other income 4 4 10 43 186 (3) 155 4,867 37 1 3,623 8,927
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Total operating
income 37,745 35,191 20,351 74,561 20,077 41,119 3,017 (98) 27,069 21,418 19,036 299,486
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Staff costs (2,622) (1,452) (2,902) (30,007) (5,677) (6,240) (1,825) (2,055) (6,169) (1,108) (39,948) (100,005)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Staff costs-voluntary
exit plan and
other termination
benefits - - - - - - - - - - (3,130) (3,130)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Special levy on
deposits and other
levies/contributions (1,015) (625) (806) (10,448) (45) (3,272) (295) - - (1) - (16,507)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Other operating
(expenses)/income
(excluding advisory
and other
restructuring
costs) (9,936) (10,096) (7,652) (39,183) (11,197) (5,055) (1,170) (8,215) (5,563) (5,142) 29,491 (73,718)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Other operating
expenses -- advisory
and other
restructuring costs - - - - (1,053) - - (351) - - (5,271) (6,675)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Operating profit
before credit losses
and impairment 24,172 23,018 8,991 (5,077) 2,105 26,552 (273) (10,719) 15,337 15,167 178 99,451
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Credit losses on
financial assets (2,356) (3,631) 569 293 (16,577) 285 (226) (323) (101) (167) (2,731) (24,965)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Impairment net of
reversals of
non--financial
assets - - - - - - - (7,203) - - (4,954) (12,157)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Profit/(loss) before
tax 21,816 19,387 9,560 (4,784) (14,472) 26,837 (499) (18,245) 15,236 15,000 (7,507) 62,329
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Income tax (2,727) (2,423) (1,195) 598 1,809 (3,355) 3 2,429 (1,309) (1,875) (3,534) (11,579)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Profit/(loss) after
tax 19,089 16,964 8,365 (4,186) (12,663) 23,482 (496) (15,816) 13,927 13,125 (11,041) 50,750
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Non--controlling
interests--profit - - - - - - - - - - (662) (662)
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Profit/(loss) after
tax attributable
to the owners of the
Company 19,089 16,964 8,365 (4,186) (12,663) 23,482 (496) (15,816) 13,927 13,125 (11,703) 50,088
-------------- -------------- --------------- ----------------- ----------------- -------------- --------------- ---------- -------------- ------------ ------------ ------------
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and and recoveries banking management
international medium--sized services
corporate enterprises
Six months ended 30
June 2021 (restated) EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net interest
income/(expense) 27,082 27,739 15,061 38,734 30,070 4,127 220 (12,417) (9) 8,179 13,427 152,213
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net fee and
commission
income/(expense) 6,926 5,385 4,445 20,764 7,690 26,846 2,773 (86) (3,759) 953 11,920 83,857
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net foreign exchange
gains/(losses) 238 101 233 812 30 2,699 1,341 - - 1,160 (64) 6,550
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net (losses)/gains on
financial instrument
transactions - (116) - - (3,035) - (322) 6 (303) (10,270) 844 (13,196)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net gains/(losses) on
derecognition
of financial assets
measured at
amortised
cost 34 1,187 658 219 (971) (75) 1 - - - - 1,053
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Insurance income net
of claims and
commissions - - - - - - - - 31,068 - - 31,068
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net losses from
revaluation and
disposal
of investment
properties - - - - - - - (709) - - (672) (1,381)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net gains on disposal
of stock of property - - - - - - - 7,180 - - 192 7,372
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Other income 1 2 6 177 32 1 100 3,284 30 - 2,221 5,854
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Total operating
income 34,281 34,298 20,403 60,706 33,816 33,598 4,113 (2,742) 27,027 22 27,868 273,390
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Staff costs (2,604) (1,473) (2,992) (30,147) (8,015) (6,222) (1,993) (1,838) (5,396) (739) (39,447) (100,866)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Special levy on
deposits and other
levies/contributions (916) (461) (763) (9,846) (49) (2,937) (283) - - - - (15,255)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Other operating
(expenses)/income
(excluding
advisory and other
restructuring costs) (8,686) (8,380) (7,963) (33,637) (12,960) (4,518) (1,652) (8,706) (4,204) (4,232) 14,791 (80,147)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Other operating
expenses -- advisory
and other
restructuring costs - - - - (14,559) - - (607) - - (275) (15,441)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Operating profit
before credit losses
and impairment 22,075 23,984 8,685 (12,924) (1,767) 19,921 185 (13,893) 17,427 (4,949) 2,937 61,681
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Credit losses on
financial assets (1,666) (4,089) 913 11,906 (55,320) 1,548 (65) (91) (184) (57) (5,058) (52,163)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Impairment net of
reversals of
non--financial
assets - - - - - - - (6,742) - - (656) (7,398)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Profit/(loss) before
tax 20,409 19,895 9,598 (1,018) (57,087) 21,469 120 (20,726) 17,243 (5,006) (2,777) 2,120
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Income tax (2,551) (2,487) (1,200) 127 7,136 (2,684) (113) 895 (2,106) 626 1,389 (968)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Profit/(loss) after
tax 17,858 17,408 8,398 (891) (49,951) 18,785 7 (19,831) 15,137 (4,380) (1,388) 1,152
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Non--controlling
interests--profit - - - - - - - - - - (413) (413)
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Profit/(loss) after
tax attributable
to the owners of the
Company 17,858 17,408 8,398 (891) (49,951) 18,785 7 (19,831) 15,137 (4,380) (1,801) 739
-------------- -------------- --------------- ----------------- ----------------- --------------- --------------- ------------ -------------- ----------- ---------- ---------------
Net insurance income for the six months ended 30 June 2022 amounted to EUR32,869 thousand, comprising
of income from assets under insurance and reinsurance contracts of EUR29,859 thousand and a credit
for expenses from liabilities under insurance and reinsurance contracts of EUR3,010 thousand, compared
to EUR31,068 thousand for the six months ended 30 June 2021 (comprising of income from assets under
insurance and reinsurance contracts of EUR103,824 thousand and expenses from liabilities under insurance
and reinsurance contracts of EUR72,756 thousand respectively). The increase in net insurance income
of EUR1,801 thousand, is mainly due to increased new business and the positive changes in valuation
assumptions, partially offset by higher insurance claims. The decrease in income from assets under
insurance and reinsurance contracts is impacted by the valuation on the unit--linked investments,
which in turn has a positive impact on the respective technical reserves, whose movement is reported
under expenses from liabilities under insurance and reinsurance contracts.
Analysis of total revenue
Total revenue includes net interest income, net fee and commission income, net foreign exchange
gains, net gains/(losses) on financial instrument transactions, net gains/(losses) on derecognition
of financial assets measured at amortised cost, insurance income net of claims and commissions,
net gains/(losses) from revaluation and disposal of investment properties, net gains/(losses) on
disposal of stock of property and other income. There was no revenue deriving from transactions
with a single external customer that amounted to 10% or more of Group revenue.
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and and recoveries banking management
International medium--sized services
corporate enterprises
Six months ended
30 June
2022 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------ ------------- --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ --------- -------------- -------------------
Revenue from third
parties 42,440 40,306 21,749 77,546 21,454 37,163 3,275 12,102 31,704 (6,315) 18,062 299,486
------------ ------------- --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ --------- -------------- -------------------
Inter--segment
(expense)/revenue (4,695) (5,115) (1,398) (2,985) (1,377) 3,956 (258) (12,200) (4,635) 27,733 974 -
------------ ------------- --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ --------- -------------- -------------------
Total revenue 37,745 35,191 20,351 74,561 20,077 41,119 3,017 (98) 27,069 21,418 19,036 299,486
------------ ------------- --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ --------- -------------- -------------------
Six months ended
30 June
2021 (restated)
Revenue from third
parties 38,511 38,874 21,893 64,878 35,972 31,495 4,556 9,576 30,060 (18,244) 15,819 273,390
------------ ------------ --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ ---------- ------------ -------------------
Inter--segment
(expense)/revenue (4,230) (4,576) (1,490) (4,172) (2,156) 2,103 (443) (12,318) (3,033) 18,266 12,049 -
------------ ------------ --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ ---------- ------------ -------------------
Total revenue 34,281 34,298 20,403 60,706 33,816 33,598 4,113 (2,742) 27,027 22 27,868 273,390
------------ ------------ --------------- --------------- --------------- ---------------- ---------------- ----------- ------------ ---------- ------------ -------------------
Analysis of assets and liabilities
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and medium--sized and recoveries banking management
international enterprises services
corporate
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Assets
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Assets 2,148,827 2,226,206 1,033,646 4,155,410 651,062 136,120 67,126 1,235,597 990,211 12,116,263 1,449,264 26,209,732
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Inter--segment
assets - - - - - - (10,838) (35,761) (16,487) - (25,659) (88,745)
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
2,148,827 2,226,206 1,033,646 4,155,410 651,062 136,120 56,288 1,199,836 973,724 12,116,263 1,423,605 26,120,987
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Assets between
Cyprus and
overseas
operations (277,255)
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Total assets 25,843,732
------------- -------------- ------------------ ---------------- ---------------- ------------- --------------- ---------- ------------ ------------- ------------ -------------
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and medium--sized and recoveries banking management
international enterprises services
corporate
31 December
2021 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Assets
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Assets 2,012,908 2,139,025 1,036,958 4,011,930 703,926 134,596 73,512 1,282,342 1,023,678 11,412,964 1,583,202 25,415,041
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Inter--segment
assets - - - - - - (12,036) (16,240) (20,367) - (15,227) (63,870)
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
2,012,908 2,139,025 1,036,958 4,011,930 703,926 134,596 61,476 1,266,102 1,003,311 11,412,964 1,567,975 25,351,171
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Assets between
Cyprus and
overseas
operations (388,474)
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Total assets 24,962,697
------------- -------------- ------------------ ---------------- ---------------- ---------------- --------------- ------------ ------------ ------------- ------------ -------------
Corporate Large Small Retail Restructuring International Wealth REMU Insurance Treasury Other Total
and and medium--sized and recoveries banking management
international enterprises services
corporate
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
Liabilities
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
Liabilities 1,247,265 820,982 900,332 11,444,665 57,974 3,667,783 329,834 39,513 787,443 4,153,824 668,622 24,118,237
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
Inter--segment
liabilities - - - - - - - - - (88,745) - (88,745)
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
1,247,265 820,982 900,332 11,444,665 57,974 3,667,783 329,834 39,513 787,443 4,065,079 668,622 24,029,492
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
Liabilities
between Cyprus
and overseas
operations (278,381)
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
Total
liabilities 23,751,111
------------- ---------------- ------------------ ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- -------------
31 December
2021
Liabilities
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
Liabilities 1,117,148 631,002 866,860 11,051,397 45,994 3,500,183 335,587 13,359 826,816 4,161,124 785,469 23,334,939
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
Inter--segment
liabilities - - - - - - - - - (63,870) - (63,870)
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
1,117,148 631,002 866,860 11,051,397 45,994 3,500,183 335,587 13,359 826,816 4,097,254 785,469 23,271,069
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
Liabilities (389,599)
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
Liabilities 22,881,470
------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- ----------- ------------- ------------ ------------- ---------------
Segmental analysis of customer deposits and loans and advances to customers is presented in Note
21 and Notes 29.2 and 29.4 respectively.
Analysis of turnover
Six months ended
30 June
2022 2021
(restated)
---------------- -----------------
EUR000 EUR000
---------------- -----------------
Interest income and income similar to interest
income 190,988 196,898
---------------- -----------------
Fees and commission income 98,086 87,610
---------------- -----------------
Net foreign exchange gains 11,898 6,550
---------------- -----------------
Gross insurance premiums 105,591 95,089
---------------- -----------------
Losses of investment properties and stock of properties (494) (1,377)
---------------- -----------------
Other income 8,927 5,854
---------------- -----------------
414,996 390,624
---------------- -----------------
The analysis of 'Losses of investment properties and stock of
properties' is provided in the table below:
Six months ended
30 June
2022 2021
---------------- -----------------
EUR000 EUR000
---------------- -----------------
Net losses from revaluation and disposal of investment
properties (1,372) (1,381)
---------------- -----------------
Net gains on disposal of stock of property 8,242 7,372
---------------- -----------------
Impairment of stock of property (Note 10) (7,364) (7,368)
---------------- -----------------
(494) (1,377)
---------------- -----------------
8. Net losses on financial instruments
Six months ended
30 June
2022 2021
(restated)
------------------- -------------------
EUR000 EUR000
------------------- -------------------
Trading portfolio:
------------------- -------------------
-- derivative financial instruments 37 23
------------------- -------------------
Other investments at FVPL:
------------------- -------------------
-- debt securities (367) 2,540
------------------- -------------------
-- mutual funds (1,716) (575)
------------------- -------------------
-- equity securities (166) (171)
------------------- -------------------
Net loss on disposal of FVOCI debt securities (1,959) -
------------------- -------------------
Net loss on early redemption of subordinated loan
stock - (12,433)
------------------- -------------------
Net losses on loans and advances to customers at
FVPL (2,059) (3,151)
------------------- -------------------
Revaluation of financial instruments designated
as fair value hedges:
------------------- -------------------
-- hedging instruments 49,687 9,786
------------------- -------------------
-- hedged items (45,517) (9,215)
------------------- -------------------
(2,060) (13,196)
------------------- -------------------
In April 2021, BOC PCL invited the holders of its EUR250 million unsecured
and subordinated Tier 2 Capital Note (issued in January 2017) to tender
it for purchase by BOC PCL at a price of 105.5% plus accrued interest.
BOC PCL received valid tenders for approximately EUR207 million in
aggregate nominal amount, all of which were accepted. As a result,
BOC PCL incurred a loss of EUR12,433 thousand for the six months ended
30 June 2021, while at the same time forfeiting the relevant obligation
for future coupon payments. Further information is provided in Note
22.
9. Staff costs and other operating expenses
Staff costs
Six months ended
30 June
2022 2021
---------------- -------------------
EUR000 EUR000
---------------- -------------------
Salaries 81,246 81,397
---------------- -------------------
Employer's contributions to state social insurance 12,982 12,905
---------------- -------------------
Retirement benefit plan costs 5,777 6,564
---------------- -------------------
100,005 100,866
---------------- -------------------
Restructuring costs -- voluntary exit plans and
other termination benefits 3,130 -
---------------- -------------------
103,135 100,866
---------------- -------------------
The number of persons employed by the Group as at 30 June 2022 was
3,422 (31 December 2021: 3,438 and includes 49 persons that have accepted
the voluntary exit plan (VEP) and left the Group in early 2022 and
30 June 2021: 3,558 and includes 98 persons relating to Helix 2 transaction
that left the Group in the second half of 2021).
In January 2022, the Group's subsidiary company, JCC Payment Systems
Ltd, proceeded with a VEP for its employees, through which 15 employees
were approved to leave at a total cost of EUR3,130 thousand. In December
2021, the Group completed a VEP, through which 102 of the Group's
full--time employees were approved to leave at a total cost of EUR16,146
thousand. In addition, in July 2022, the Group proceeded with another
VEP (refer to Note 36 for further details).
In July 2021, BOC PCL reached an agreement with the Cyprus Union of
Bank Employees for the renewal of the collective agreement for the
years 2021 and 2022. The agreement relates to certain changes including
the introduction of a new pay grading structure linked to the value
of each position of employment, and of a performance related pay component
as part of the annual salary increase, both of which have been long--standing
objectives of BOC PCL and are in line with market best--practice.
During the six months ended 30 June 2022, an amount of EUR831 thousand
(30 June 2021: nil) relating to staff costs has been capitalised as
internally developed computer software.
Other operating expenses
Six months ended
30 June
2022 2021
------------------ ------------------
EUR000 EUR000
------------------ ------------------
Repairs and maintenance expenses 17,960 15,669
------------------ ------------------
Other property--related costs 5,865 5,708
------------------ ------------------
Consultancy and other professional services fees 8,526 7,132
------------------ ------------------
Insurance 4,218 3,725
------------------ ------------------
Advertising and marketing 3,672 2,751
------------------ ------------------
Depreciation of property and equipment 7,821 8,266
------------------ ------------------
Amortisation of intangible assets 9,087 9,325
------------------ ------------------
Communication expenses 3,431 3,449
------------------ ------------------
Provisions for pending litigations, claims, regulatory
and other matters (Note 25.4) 594 10,660
------------------ ------------------
Printing and stationery 898 814
------------------ ------------------
Cash transfer expenses 1,630 1,139
------------------ ------------------
Other operating expenses 10,016 11,509
------------------ ------------------
73,718 80,147
------------------ ------------------
Advisory and other restructuring costs 6,675 15,441
------------------ ------------------
80,393 95,588
------------------ ------------------
Advisory and other restructuring costs comprise mainly fees to external
advisors in relation to the transformation programme and strategy
of BOC PCL.
During the six months ended 30 June 2022, the Group recognised EUR84
thousand relating to rent expense for short term leases, included
within 'Other property related costs (30 June 2021: EUR67 thousand)
and EUR3,423 thousand relating to the depreciation of right--of--use
assets, included within 'Depreciation of property and equipment'
(30 June 2021: EUR3,920 thousand).
Six months ended
30 June
2022 2021
---------------- -----------------
EUR000 EUR000
---------------- -----------------
Special levy on deposits of credit institutions
in Cyprus and contribution to Single Resolution
Fund 13,246 12,370
---------------- -----------------
Contribution to Deposit Guarantee Fund 3,261 2,885
---------------- -----------------
16,507 15,255
---------------- -----------------
The special levy on credit institutions in Cyprus (the Special Levy)
is imposed on the level of deposits as at the end of the previous
quarter, at the rate of 0.0375% per quarter. Following an amendment
of the Imposition of Special Credit Institution Tax Law in 2017, the
Single Resolution Fund contribution, which is charged annually by
the Single Resolution Board, reduces the payment of the Special Levy
up to the level of the total annual Special Levy charge.
As from 1 January 2020 and until 3 July 2024 BOC PCL is subject to
a contribution to the Deposit Guarantee Fund (DGF) on a semi--annual
basis. The contributions are calculated based on the Risk Based Methodology
(RBM) as approved by the management committee of the Deposit Guarantee
and Resolution of Credit and Other Institutions Schemes (DGS) and
is publicly available on the CBC's website. In line with the RBM,
the contributions are broadly calculated on the covered deposits of
all authorised institutions and the target level is to reach at 0.8%
of covered deposits by 3 July 2024.
10. Credit losses on financial instruments and impairment net of
reversals of non--financial assets
Six months ended
30 June
2022 2021
------------------- --------------------
Credit losses on financial instruments EUR000 EUR000
------------------- --------------------
Credit losses to cover credit risk on loans and
advances to customers
------------------- --------------------
Impairment net of reversals on loans and advances
to customers (Note 29.5) 28,055 41,717
------------------- --------------------
Recoveries of loans and advances to customers previously
written off (6,509) (5,036)
------------------- --------------------
Changes in expected cash flows 2,840 10,393
------------------- --------------------
Financial guarantees and commitments (427) 1,275
------------------- --------------------
23,959 48,349
------------------- --------------------
Credit losses of other financial instruments
------------------- --------------------
Amortised cost debt securities 21 51
------------------- --------------------
FVOCI debt securities 163 15
------------------- --------------------
Loans and advances to banks (22) 9
------------------- --------------------
Other financial assets (Note 18) 844 3,739
------------------- --------------------
1,006 3,814
------------------- --------------------
24,965 52,163
------------------- --------------------
Impairment net of reversals on non--financial assets
Stock of property (Note 17) 7,364 7,368
---------------- -------------------
Other non--financial assets 4,793 30
---------------- -------------------
12,157 7,398
---------------- -------------------
11. Income tax
Six months ended
30 June
2022 2021
------------------- -------------------
EUR000 EUR000
------------------- -------------------
Current tax:
------------------- -------------------
-- Cyprus 12,653 1,973
------------------- -------------------
-- Overseas 34 -
------------------- -------------------
Cyprus special defence contribution 79 59
------------------- -------------------
Deferred tax (credit)/charge (1,149) 504
------------------- -------------------
Prior years' tax adjustments (16) (1,890)
------------------- -------------------
Other tax (credits)/charges (22) 322
------------------- -------------------
11,579 968
------------------- -------------------
The net deferred tax assets comprise:
30 June 31 December
2022 2021
EUR000 EUR000
---------------- -----------------
Deferred tax assets 265,430 265,481
---------------- -----------------
Deferred tax liabilities (45,235) (46,435)
---------------- -----------------
Net deferred tax assets 220,195 219,046
---------------- -----------------
The deferred tax assets (DTA) relate to Cyprus operations.
The movement of the net deferred tax assets is set out below:
30 June 31 December
2022 2021
EUR000 EUR000
------------------- ------------------
1 January 219,046 295,378
------------------- ------------------
Deferred tax recognised in the consolidated income
statement 1,149 (641)
------------------- ------------------
Deferred tax recognised in the consolidated statement
of comprehensive income - 127
------------------- ------------------
Transfer to current tax receivables following conversion
into tax credit - (75,818)
------------------- ------------------
30 June/31 December 220,195 219,046
------------------- ------------------
The Group offsets income tax assets and liabilities only if it has
a legally enforceable right to set--off current income tax assets
and current income tax liabilities.
BOC PCL has DTA that meets the requirements of the Income Tax Law
Amendment 28(I) of 2019 (the 'Law'), which allow for the conversion
of specific tax losses into tax credits and subsequently any such
unutilised tax credits into a receivable from the Cyprus Government,
relating to income tax losses transferred to BOC PCL as a result of
the acquisition of certain operations of Laiki Bank, on 29 March 2013,
under 'The Resolution of Credit and Other Institutions Law'. The DTA
recognised upon the acquisition of certain operations of Laiki in
2013 amounted to EUR417 million for which BOC PCL paid a consideration
as part of the respective acquisition. Under the Law, BOC PCL could
convert up to an amount of EUR3.3 billion tax losses (which led to
the creation of DTA amounting to EUR417 million) to tax credits, with
the conversion being based on the tax rate applicable at the time
of conversion. The period of utilisation of the tax losses which may
be converted into tax credits is eleven years following the amendment
of the Law in 2019, starting from 2018 i.e. by end of 2028.
As a result of the above Law, the Group has DTA amounting to EUR265,364
thousand as at 30 June 2022 (31 December 2021: EUR265,364 thousand)
that meet the requirements under this Law, the recovery of which is
guaranteed. On an annual basis an amount is converted to annual tax
credit and is reclassified from the DTA to current tax receivables.
The DTA subject to the Law is accounted for on the same basis, as
described in Note 2.13 of the annual consolidated financial statements
for the year ended 31 December 2021.
In response to concerns raised by the European Commission with regard
to the provision of state aid arising out of the treatment of such
tax losses, the Cyprus Government has proceeded with the adoption
of modifications to the Law, including requirements for an additional
annual fee over and above the 1.5% annual guarantee fee already provided
for in the Law, to maintain the conversion of such DTAs into tax
credits. The relevant amendments were voted by the Cyprus Parliament
in May 2022 and have become effective since. As prescribed by the
amendments in the Law, the annual fee is to be determined by the
Cyprus Government on an annual basis, providing however, for such
fee to be charged to be set at a minimum fee of 1.5% of the annual
instalment and can range up to a maximum amount of EUR10,000 thousand
per year, and also allowing for a higher amount to be charged in
the year the amendments are effective (i.e. in 2022).
The Group in prior years, in anticipation of modifications in the
Law, acknowledged that such increased annual fee may be required
to be recorded on an annual basis until expiration of such losses
in 2028. The Group estimates that such fees could range up to EUR5,300
thousand per year (for each tax year in scope i.e. since 2018) although
the Group understands that such fee may fluctuate annually as to
be determined by the Ministry of Finance. An amount of EUR5,300 thousand
was recorded during the year ended 31 December 2021, bringing the
total amount provided by the Group for such increased fee to EUR21,200
thousand for years 2018--2021. In the third quarter of 2022, BOC
PCL has been levied an amount within the provisions level maintained.
Accumulated income tax losses
The accumulated income tax losses are presented in the table
below:
Total income Income tax Income tax
tax losses losses for losses for
which a deferred which no deferred
tax asset tax asset
30 June 2022 was recognised was recognised
EUR000 EUR000 EUR000
------------------ ---------------------- ---------------------
Expiring within 5 years 233,545 - 233,545
------------------ ---------------------- ---------------------
Utilisation in annual instalments up
to 2028 2,122,909 2,122,909 -
------------------ ---------------------- ---------------------
2,356,454 2,122,909 233,545
------------------ ---------------------- ---------------------
31 December 2021
------------------ ---------------------- ---------------------
Expiring within 5 years 251,448 - 251,448
------------------ ---------------------- ---------------------
Utilisation in annual instalments up
to 2028 2,122,909 2,122,909 -
------------------ ---------------------- ---------------------
2,374,357 2,122,909 251,448
------------------ ---------------------- ---------------------
In relation to the tax losses that were transferred to BOC PCL in
2013, the income tax authorities in Cyprus issued their tax assessments
in March and April 2019. On the basis of these assessments the quantum
of Laiki Bank tax losses was approximately EUR5 billion and lower
than the initial amount of EUR7.4 billion estimated in 2013.
The tax losses in excess of the EUR3.3 billion transferred from Laiki
Bank to BOC PCL in March 2013 cannot be utilised by BOC PCL, in line
with the March 2019 Law amendments, except in cases where there are
transfers arising due to reorganisations made prior to 1 October
2019.
12. Earnings per share
Six months ended
30 June
Basic and diluted profit per share attributable 2022 2021
to the owners of the Company
------------------ -------------------
Profit for the period attributable to the owners
of the Company
(EUR thousand) 50,088 739
------------------ -------------------
Weighted average number of shares in issue during
the period, excluding treasury shares (thousand) 446,058 446,058
------------------ -------------------
Basic and diluted profit per share (EUR cent) 11.2 0.2
------------------ -------------------
13. Investments
The analysis of the Group's investments is presented in the table
below:
30 June 31 December
2022 2021
EUR000 EUR000
--------------- ----------------
Investments at FVPL 181,318 199,194
--------------- ----------------
Investments at FVOCI 529,872 748,695
--------------- ----------------
Investments at amortised cost 1,391,487 1,191,274
--------------- ----------------
2,102,677 2,139,163
--------------- ----------------
Out of these, the amounts pledged as collateral are shown
below:
30 June 31 December
2022 2021
Investments pledged as collateral EUR000 EUR000
------------------ ------------------
Investments at FVOCI 385,429 488,806
------------------ ------------------
Investments at amortised cost 984,042 771,352
------------------ ------------------
1,369,471 1,260,158
------------------ ------------------
Investments pledged as collateral as at 30 June 2022 related to debt
securities collaterised mainly for the additional amounts borrowed
from the ECB Targeted Longer--Term Refinancing Operations (TLTRO III)
in March 2021 and June 2021 of a total nominal amount of EUR2 billion,
as further described in Note 20. Encumbered assets are disclosed in
Note 31.
The maximum exposure to credit risk for debt securities is disclosed
in Note 29.1.
Investments in equity securities and mutual funds as at 30 June 2022,
included above, amount to EUR22,451 thousand and EUR166,455 thousand
respectively (31 December 2021: EUR24,668 thousand and EUR184,107
thousand respectively). Investments in debt securities and other non--equity
securities included above amount to EUR1,913,771 thousand (31 December
2021: EUR1,930,388 thousand) and are analysed below by issuer type.
Debt securities and other non--equity FVPL FVOCI Amortised Total
securities by issuer type cost
30 June 2022 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- ---------------- --------------
Cyprus government - 324,436 369,764 694,200
-------------------- -------------------- ---------------- --------------
Other governments - 43,441 300,545 343,986
-------------------- -------------------- ---------------- --------------
Banks 500 142,526 451,805 594,831
-------------------- -------------------- ---------------- --------------
Other financial institutions 5,476 - 27,234 32,710
-------------------- -------------------- ---------------- --------------
European Financial Stability Facility
and European Investment Fund - - 225,224 225,224
-------------------- -------------------- ---------------- --------------
Other non--financial corporations - 5,905 16,915 22,820
-------------------- -------------------- ---------------- --------------
5,976 516,308 1,391,487 1,913,771
-------------------- -------------------- ---------------- --------------
31 December 2021 EUR000 EUR000 EUR000 EUR000
Cyprus government - 408,708 326,953 735,661
-------------------- -------------------- ----------------- ---------------
Other governments - 87,295 223,813 311,108
-------------------- -------------------- ----------------- ---------------
Banks 500 230,513 397,775 628,788
-------------------- -------------------- ----------------- ---------------
Other financial institutions 5,534 - 33,507 39,041
-------------------- -------------------- ----------------- ---------------
European Financial Stability Facility
and European Investment Fund - - 209,226 209,226
-------------------- -------------------- ----------------- ---------------
Other non--financial corporations - 6,564 - 6,564
-------------------- -------------------- ----------------- ---------------
6,034 733,080 1,191,274 1,930,388
-------------------- -------------------- ----------------- ---------------
The Group enters into fair value hedging relationship to manage the
interest rate risk in relation to its FVOCI bonds (Note 14).
There were no reclassifications of investments during the six months
ended 30 June 2022 and the year ended 31 December 2021.
During the six months ended 30 June 2022 and the year ended 31 December
2021 no material equity investments measured at FVOCI have been disposed
of. There were no transfers from OCI to retained earnings during
the period.
The fair value of the financial assets that have been reclassified
out of FVPL to FVOCI on transition to IFRS 9, amounts to EUR10,055
thousand at 30 June 2022 (31 December 2021: EUR11,066 thousand).
The fair value loss that would have been recognised in the consolidated
income statement during the six months ended 30 June 2022 if these
financial assets had not been reclassified as part of the transition
to IFRS 9, amounts to EUR1,018 thousand (six months ended 30 June
2021: loss of EUR41 thousand). The effective interest rate of these
instruments is 1.6%--5.0% (2021: 1.6%--5.0%) per annum and the respective
interest income during the six months ended 30 June 2022 amounts
to EUR128 thousand (six months ended 30 June 2021: EUR150 thousand).
14. Derivative financial instruments
The contract amount and fair value of the derivative financial
instruments is set out below:
30 June 2022 31 December 2021
Fair value Fair value
----------------------------------
Contract Assets Liabilities Contract Assets Liabilities
amount amount
-------------- -------------- ------------- ----------------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- ------------------ ------------- ---------------- ----------------
Trading
derivatives
-------------- -------------- ------------------ ------------- ---------------- ----------------
Forward
exchange rate
contracts 11,006 159 45 11,344 81 55
-------------- -------------- ------------------ ------------- ---------------- ----------------
Currency swaps 1,047,475 11,597 2,044 991,117 4,388 1,342
-------------- -------------- ------------------ ------------- ---------------- ----------------
Interest rate
swaps 21,828 345 316 21,690 86 61
-------------- -------------- ------------------ ------------- ---------------- ----------------
Currency
options 532 438 94 83 62 21
-------------- -------------- ------------------ ------------- ---------------- ----------------
Interest rate
caps/floors 18,434 743 743 518,950 223 218
-------------- -------------- ------------------ ------------- ---------------- ----------------
1,099,275 13,282 3,242 1,543,184 4,840 1,697
-------------- -------------- ------------------ ------------- ---------------- ----------------
Derivatives
qualifying
for hedge
accounting
-------------- -------------- ------------------ ------------- ---------------- ----------------
Fair value
hedges --
interest rate
swaps 596,606 24,868 6,236 700,835 1,813 30,025
-------------- -------------- ------------------ ------------- ---------------- ----------------
Net investments
-- forward
exchange rate
contracts
and currency
swaps 2,874 - 7 107,193 - 730
-------------- -------------- ------------------ ------------- ---------------- ----------------
599,480 24,868 6,243 808,028 1,813 30,755
-------------- -------------- ------------------ ------------- ---------------- ----------------
Total 1,698,755 38,150 9,485 2,351,212 6,653 32,452
-------------- -------------- ------------------ ------------- ---------------- ----------------
Hedge accounting
The Group elected, as a policy choice permitted by IFRS 9, to continue
to apply hedge accounting in accordance with IAS 39.
The Group applies fair value hedge accounting using derivatives when
the required criteria for hedge accounting are met. The Group also
uses derivatives for economic hedging (hedging the changes in interest
rates, exchange rates or other risks) which do not meet the criteria
for hedge accounting. As a result, these derivatives are accounted
for as trading derivatives and the gains or losses arising from revaluation
are recognised in the consolidated income statement.
Changes in the fair value of derivatives designated as fair value
hedges and the fair value of the item in relation to the risk being
hedged are recognised in the consolidated income statement.
Fair value hedges
The Group uses interest rate swaps to hedge the interest rate risk
arising as a result of the possible adverse movement in the fair
value of fixed rate debt securities measured at FVOCI.
Hedges of net investments
The Group's consolidated balance sheet is impacted by foreign exchange
differences between the Euro and all non--Euro functional currencies
of overseas subsidiaries and other foreign operations. The Group
hedges its structural currency risk when it considers that the cost
of such hedging is within an acceptable range (in relation to the
underlying risk). This hedging is effected by financing with borrowings
in the same currency as the functional currency of the overseas subsidiaries
and other foreign operation and by forward exchange rate contracts.
As at 30 June 2022, forward and swap exchange rate contracts amounting
to EUR2,874 thousand (31 December 2021: EUR107,193 thousand) have
been designated as hedging instruments and have given rise to a loss
of EUR4,079 thousand (30 June 2021: gain of EUR3,867 thousand) which
was recognised in the 'Foreign currency translation reserve' in the
consolidated statement of comprehensive income, against the profit
or loss from the retranslation of the net assets of the overseas
subsidiaries and other foreign operations.
Interest rate benchmark reform
As at 30 June 2022 and 31 December 2021 the interest rate benchmarks
to which BOC PCL's hedge relationships are exposed to, are Euro Interbank
Offered Rate (Euribor) and US Dollar London Interbank Offered Rate
(Libor) in relation to the cash flows of the hedging instruments.
The Group has applied judgement in relation to market expectations
regarding hedging instruments. The key judgement is that the cash
flows for contracts currently indexing USD Libor tenors are expected
to have broadly equivalent cash flows upon the transition of the
contracts to IBOR replacement rates.
The table below indicates the nominal amount of derivatives in hedging
relationships analysed by interest rate basis. The derivative hedging
instruments provide a close approximation to the extent of the risk
exposure BOC PCL manages through hedging relationships.
30 June 31 December
2022 2021
Interest Rate Swaps EUR000 EUR000
--------------------- ---------------------
Euribor (3--month) 527,832 529,831
--------------------- ---------------------
Libor USD (3--month) 68,774 171,004
--------------------- ---------------------
Total 596,606 700,835
--------------------- ---------------------
As at 30 June 2022, the Group's assessment regarding the on--going
transition to the new risk--free rates (RFRs) indicates that the impact
on the hedging relationships and in value terms is not significant.
Further details in relation to interest rate benchmark reform are
disclosed in Note 30.
15. Fair value measurement
The following table presents the carrying value and fair value
of the Group's financial assets and liabilities.
30 June 2022 31 December 2021
Carrying Fair value Carrying Fair value
value value
---------------- ----------------- -----------------
Financial assets EUR000 EUR000 EUR000 EUR000
---------------- ---------------- ----------------- -----------------
Cash and balances with central
banks 9,904,549 9,904,549 9,230,883 9,230,883
---------------- ---------------- ----------------- -----------------
Loans and advances to banks 312,308 304,227 291,632 289,519
---------------- ---------------- ----------------- -----------------
Investments mandatorily measured
at FVPL 181,318 181,318 199,194 199,194
---------------- ---------------- ----------------- -----------------
Investments at FVOCI 529,872 529,872 748,695 748,695
---------------- ---------------- ----------------- -----------------
Investments at amortised cost 1,391,487 1,335,249 1,191,274 1,196,753
---------------- ---------------- ----------------- -----------------
Derivative financial assets 38,150 38,150 6,653 6,653
---------------- ---------------- ----------------- -----------------
Loans and advances to customers 10,144,099 10,052,919 9,836,405 9,642,212
---------------- ---------------- ----------------- -----------------
Life insurance business assets
attributable to policyholders 522,376 522,376 540,827 540,827
---------------- ---------------- ----------------- -----------------
Financial assets classified
as held for sale 247,207 247,207 250,370 250,370
---------------- ---------------- ----------------- -----------------
Other financial assets 417,162 417,162 393,464 393,464
---------------- ---------------- ----------------- -----------------
23,688,528 23,533,029 22,689,397 22,498,570
---------------- ---------------- ----------------- -----------------
Financial liabilities
---------------- ---------------- ----------------- -----------------
Funding from central banks and
deposits by banks 3,446,830 3,339,059 3,426,639 3,328,987
---------------- ---------------- ----------------- -----------------
Derivative financial liabilities 9,485 9,485 32,452 32,452
---------------- ---------------- ----------------- -----------------
Customer deposits 18,450,216 18,434,345 17,530,883 17,532,995
---------------- ---------------- ----------------- -----------------
Debt securities in issue 298,899 236,598 302,555 292,615
---------------- ---------------- ----------------- -----------------
Subordinated liabilities 311,738 253,643 340,220 355,159
---------------- ---------------- ----------------- -----------------
Other financial liabilities
and lease liabilities 299,979 299,979 275,519 275,519
---------------- ---------------- ----------------- -----------------
22,817,147 22,573,109 21,908,268 21,817,727
---------------- ---------------- ----------------- -----------------
The fair value of financial assets and liabilities in the above table
is as at the reporting date and does not represent any expectations
about their future value.
The Group uses the following hierarchy for determining and disclosing
fair value:
Level 1: investments valued using quoted prices in active markets.
Level 2: investments valued using models for which all inputs that
have a significant effect on fair value are market observable.
Level 3: investments valued using models for which inputs that have
a significant effect on fair value are not based on market observable
data.
For assets and liabilities that are recognised in the Consolidated
Financial Statements at fair value, the Group determines whether transfers
have occurred between levels in the hierarchy by re--assessing categorisation
at the end of each reporting period.
The following is a description of the determination of fair value
for financial instruments which are recorded at fair value on a recurring
and on a non--recurring basis and for financial instruments which
are not measured at fair value but for which fair value is disclosed,
using valuation techniques. These incorporate the Group's estimate
of assumptions that a market participant would make when valuing the
instruments.
Derivative financial instruments
Derivative financial instruments valued using a valuation technique
with market observable inputs are mainly interest rate swaps, currency
swaps, currency rate options, forward foreign exchange rate contracts
and interest rate collars. The most frequently applied valuation
techniques include forward pricing and swap models, using present
value calculations. The models incorporate various inputs including
the credit quality of counterparties, foreign exchange spot and forward
rates and interest rate curves.
Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments
(DVA)
The CVA and DVA are incorporated into derivative valuations to reflect
the impact on fair value of counterparty risk and BOC PCL's own credit
quality respectively.
The Group calculates the CVA by applying the PD of the counterparty,
conditional on the non--default of the Group, to the Group's expected
positive exposure to the counterparty and multiplying the result
by the loss expected in the event of default. Conversely, the Group
calculates the DVA by applying its own PD, conditional on the non--default
of the counterparty, to the expected positive exposure of the counterparty
to the Group and multiplying the result by the loss expected in the
event of default. Both calculations are performed over the life of
the potential exposure.
The expected exposure of derivatives is calculated as per the CRR
and takes into account the netting agreements where they exist. A
standard Loss Given Default (LGD) assumption in line with industry
norms is adopted. Alternative LGD assumptions may be adopted when
both the nature of the exposure and the available data support this.
The Group does not hold any significant derivative instruments which
are valued using a valuation technique with significant non--market
observable inputs.
Investments at FVPL, investments at FVOCI and investments at
amortised cost
Investments which are valued using a valuation technique or pricing
models, primarily consist of unquoted equity securities and debt
securities. These assets are valued using valuation models which
sometimes only incorporate market observable data and at other times
use both observable and non--observable data. The rest of the investments
are valued using quoted prices in active markets.
Loans and advances to customers
The fair value of loans and advances to customers is based on the
present value of expected future cash flows. Future cash flows have
been based on the future expected loss rate per loan portfolio, taking
into account expectations for the credit quality of the borrowers.
The discount rate includes components that capture the risk--free
rate per currency, funding cost, servicing cost and the cost of capital,
considering the risk weight of each loan. The discount rate used
in the determination of the fair value of the loans and advances
to customers measured at FVPL during the six months ended 30 June
2022 ranges from 2.65% to 8.50% (31 December 2021:2.34%--8.50%).
Customer deposits
The fair value of customer deposits is determined by calculating
the present value of future cash flows. The discount rate takes into
account current market rates and the credit profile of BOC PCL. The
fair value of deposits repayable on demand and deposits protected
by the Deposit Protection Guarantee Scheme are approximated by their
carrying values.
Loans and advances to banks
Loans and advances to banks with maturity over one year are discounted
using an appropriate risk--free rate plus the appropriate credit
spread. For short--term lending, the fair value is approximated by
the carrying value.
Deposits by banks and funding from central banks
Deposits by banks and funding from central banks with maturity over
one year are discounted using an appropriate risk--free rate plus
the appropriate credit spread. For short--term lending, the fair
value is approximated by the carrying value.
Debt securities in issue and Subordinated liabilities
Debt securities and subordinated liabilities issuances are traded
in an active market with quoted prices.
Model inputs for valuation
Observable inputs to the models for the valuation of unquoted equity
and debt securities include, where applicable, current and expected
market interest rates, market expected default rates, market implied
country and counterparty credit risk and market liquidity discounts.
The following table presents the fair value measurement
hierarchy of the Group's financial assets and liabilities recorded
at fair value or for which fair value is disclosed, by level of the
fair value hierarchy:
Level 1 Level 2 Level 3 Total
30 June 2022 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- -----------------
Financial assets measured at
fair value
------------------- ------------------- ------------------- -----------------
Loans and advances to customers
measured at FVPL - - 282,184 282,184
------------------- ------------------- ------------------- -----------------
Trading derivatives
------------------- ------------------- ------------------- -----------------
Forward exchange rate contracts - 159 - 159
------------------- ------------------- ------------------- -----------------
Currency swaps - 11,597 - 11,597
------------------- ------------------- ------------------- -----------------
Interest rate swaps - 345 - 345
------------------- ------------------- ------------------- -----------------
Currency options - 438 - 438
------------------- ------------------- ------------------- -----------------
Interest rate caps/floors - 743 - 743
------------------- ------------------- ------------------- -----------------
- 13,282 - 13,282
------------------- ------------------- ------------------- -----------------
Derivatives qualifying for hedge
accounting
------------------- ------------------- ------------------- -----------------
Fair value hedges--interest
rate swaps - 24,868 - 24,868
------------------- ------------------- ------------------- -----------------
Investments mandatorily measured
at FVPL 83,879 91,463 5,976 181,318
------------------- ------------------- ------------------- -----------------
Investments at FVOCI 517,876 - 11,996 529,872
------------------- ------------------- ------------------- -----------------
601,755 129,613 300,156 1,031,524
------------------- ------------------- ------------------- -----------------
Other financial assets not measured
at fair value
------------------- ------------------- ------------------- -----------------
Loans and advances to banks - 304,227 - 304,227
------------------- ------------------- ------------------- -----------------
Investments at amortised cost 1,216,176 101,678 17,396 1,335,250
------------------- ------------------- ------------------- -----------------
Loans and advances to customers - - 9,770,735 9,770,735
------------------- ------------------- ------------------- -----------------
1,216,176 405,905 9,788,131 11,410,212
------------------- ------------------- ------------------- -----------------
For loans and advances to customers measured at FVPL categorised as
Level 3, an increase in the discount factor by 10% would result in
a decrease of EUR4,581 thousand in their fair value and a decrease
in the discount factor by 10% would result in an increase of EUR886
thousand in their fair value.
For one investment included in debt and other non--equity securities
mandatorily measured at FVPL as a result of the SPPI assessment and
categorised as Level 3 with a carrying amount of EUR5,476 thousand
as at 30 June 2022, a change in the conversion factor by 10% would
result in a change in the value of the debt and other non--equity
securities by EUR548 thousand.
Level 1 Level 2 Level 3 Total
30 June 2022 EUR000 EUR000 EUR000 EUR000
------------------- -------------------- ------------------- --------------------
Financial liabilities measured
at fair value
------------------- -------------------- ------------------- --------------------
Trading derivatives
------------------- -------------------- ------------------- --------------------
Forward exchange rate contracts - 45 - 45
------------------- -------------------- ------------------- --------------------
Currency swaps - 2,044 - 2,044
------------------- -------------------- ------------------- --------------------
Interest rate swaps - 316 - 316
------------------- -------------------- ------------------- --------------------
Currency options - 94 - 94
------------------- -------------------- ------------------- --------------------
Interest rate caps/floors - 743 - 743
------------------- -------------------- ------------------- --------------------
- 3,242 - 3,242
------------------- -------------------- ------------------- --------------------
Derivatives qualifying for hedge
accounting
------------------- -------------------- ------------------- --------------------
Fair value hedges--interest
rate swaps - 6,236 - 6,236
------------------- -------------------- ------------------- --------------------
Net investments--forward
exchange
rate contracts and currency
swaps - 7 - 7
------------------- -------------------- ------------------- --------------------
- 6,243 - 6,243
------------------- -------------------- ------------------- --------------------
- 9,485 - 9,485
------------------- -------------------- ------------------- --------------------
Other financial liabilities
not measured at fair value
------------------- -------------------- ------------------- --------------------
Funding from central banks - 2,910,529 - 2,910,529
------------------- -------------------- ------------------- --------------------
Deposits by banks - 428,530 - 428,530
------------------- -------------------- ------------------- --------------------
Customer deposits - - 18,434,345 18,434,345
------------------- -------------------- ------------------- --------------------
Debt securities in issue 236,598 - - 236,598
------------------- -------------------- ------------------- --------------------
Subordinated liabilities 253,643 - - 253,643
------------------- -------------------- ------------------- --------------------
490,241 3,339,059 18,434,345 22,263,645
------------------- -------------------- ------------------- --------------------
Level 1 Level 2 Level 3 Total
31 December 2021 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- -------------------
Financial assets measured at
fair value
------------------- ------------------- ------------------- -------------------
Loans and advances to customers
measured at FVPL - - 281,868 281,868
------------------- ------------------- ------------------- -------------------
Trading derivatives
------------------- ------------------- ------------------- -------------------
Forward exchange rate contracts - 81 - 81
------------------- ------------------- ------------------- -------------------
Currency swaps - 4,388 - 4,388
------------------- ------------------- ------------------- -------------------
Interest rate swaps - 86 - 86
------------------- ------------------- ------------------- -------------------
Currency options - 62 - 62
------------------- ------------------- ------------------- -------------------
Interest rate caps/floors - 223 - 223
------------------- ------------------- ------------------- -------------------
- 4,840 - 4,840
------------------- ------------------- ------------------- -------------------
Derivatives qualifying for hedge
accounting
------------------- ------------------- ------------------- -------------------
Fair value hedges--interest
rate swaps - 1,813 - 1,813
------------------- ------------------- ------------------- -------------------
Investments mandatorily measured
at FVPL 98,016 95,144 6,034 199,194
------------------- ------------------- ------------------- -------------------
Investments at FVOCI 734,832 - 13,863 748,695
------------------- ------------------- ------------------- -------------------
832,848 101,797 301,765 1,236,410
------------------- ------------------- ------------------- -------------------
Other financial assets not
measured
at fair value
------------------- ------------------- ------------------- -------------------
Loans and advances to banks - 289,519 - 289,519
------------------- ------------------- ------------------- -------------------
Investments at amortised cost 1,074,144 98,238 24,371 1,196,753
------------------- ------------------- ------------------- -------------------
Loans and advances to customers - - 9,360,344 9,360,344
------------------- ------------------- ------------------- -------------------
1,074,144 387,757 9,384,715 10,846,616
------------------- ------------------- ------------------- -------------------
For loans and advances to customers measured at FVPL categorised
as Level 3, an increase in the discount factor by 10% would result
in a decrease of EUR4,647 thousand in their fair value and a decrease
in the discount factor by 10% would result in an increase of EUR784
thousand in their fair value.
For one investment included in debt and other non--equity securities
mandatorily measured at FVPL as a result of the SPPI assessment and
categorised as Level 3 with a carrying amount of EUR5,534 thousand
as at 31 December 2021, a change in the conversion factor by 10%
would result in a change in the value of the debt and other non--equity
securities by EUR553 thousand.
Level 1 Level 2 Level 3 Total
31 December 2021 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- -------------------
Liabilities measured at fair
value
------------------- ------------------- ------------------- -------------------
Trading derivatives
------------------- ------------------- ------------------- -------------------
Forward exchange rate contracts - 55 - 55
------------------- ------------------- ------------------- -------------------
Currency swaps - 1,342 - 1,342
------------------- ------------------- ------------------- -------------------
Interest rate swaps - 61 - 61
------------------- ------------------- ------------------- -------------------
Currency options - 21 - 21
------------------- ------------------- ------------------- -------------------
Interest rate caps/floors - 218 - 218
------------------- ------------------- ------------------- -------------------
- 1,697 - 1,697
------------------- ------------------- ------------------- -------------------
Derivatives qualifying for hedge
accounting
------------------- ------------------- ------------------- -------------------
Fair value hedges--interest
rate swaps - 30,025 - 30,025
------------------- ------------------- ------------------- -------------------
Net investments--forward exchange
rate contracts and currency
swaps - 730 - 730
------------------- ------------------- ------------------- -------------------
- 30,755 - 30,755
------------------- ------------------- ------------------- -------------------
- 32,452 - 32,452
------------------- ------------------- ------------------- -------------------
Other financial liabilities
not measured at fair value
------------------- ------------------- ------------------- -------------------
Funding from central banks - 2,950,646 - 2,950,646
------------------- ------------------- ------------------- -------------------
Deposits by banks - 378,341 - 378,341
------------------- ------------------- ------------------- -------------------
Customer deposits - - 17,532,995 17,532,995
------------------- ------------------- ------------------- -------------------
Debt securities in issue 292,615 - - 292,615
------------------- ------------------- ------------------- -------------------
Subordinated liabilities 355,159 - - 355,159
------------------- ------------------- ------------------- -------------------
647,774 3,328,987 17,532,995 21,509,756
------------------- ------------------- ------------------- -------------------
The cash and balances with central banks are financial instruments
whose carrying value is a reasonable approximation of fair value because
they are mostly short--term in nature or are repriced to current market
rates frequently. The carrying value of other financial assets and
other financial liabilities and assets classified as held for sale
is a close approximation of their fair value and they are categorised
as Level 3.
During the six months ended 30 June 2022 and the year ended 31 December
2021 there were no significant transfers between Level 1 and Level
2.
Movements in Level 3 assets measured at fair value
Transfers from Level 3 to Level 2 occur when the market for some securities
becomes more liquid, which eliminates the need for the previously
required significant unobservable valuation inputs. Following a transfer
to Level 2 the instruments are valued using valuation models incorporating
observable market inputs. Transfers into Level 3 reflect changes in
market conditions as a result of which instruments become less liquid.
Therefore, the Group requires significant unobservable inputs to calculate
their fair value.
The movement in Level 3 financial assets which are measured at
fair value is presented below:
30 June 2022 31 December 2021
Loans and Financial Total Loans and Financial Total
advances instruments advances instruments
to customers to customers
-------------- --------------- --------------- ---------------
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- -------------- --------------- --------------- ---------------
1 January 281,868 19,897 301,765 289,861 33,182 323,043
-------------- -------------- -------------- --------------- --------------- ---------------
Additions - - - - 396 396
-------------- -------------- -------------- --------------- --------------- ---------------
Disposals - - - - (903) (903)
-------------- -------------- -------------- --------------- --------------- ---------------
Conversion of
instruments
into common shares - - - - (18,618) (18,618)
-------------- -------------- -------------- --------------- --------------- ---------------
Fair value
(losses)/gains - (1,925) (1,925) - 5,840 5,840
-------------- -------------- -------------- --------------- --------------- ---------------
Net losses on loans
and advances to
customers
measured at FVPL (Note
8) (2,059) - (2,059) (17,292) - (17,292)
-------------- -------------- -------------- --------------- --------------- ---------------
Derecognition/repayment
of loans (3,624) - (3,624) (3,083) - (3,083)
-------------- -------------- -------------- --------------- --------------- ---------------
Interest on loans 5,999 - 5,999 12,382 - 12,382
-------------- -------------- -------------- --------------- --------------- ---------------
30 June/31 December 282,184 17,972 300,156 281,868 19,897 301,765
-------------- -------------- -------------- --------------- --------------- ---------------
16. Loans and advances to customers
30 June 31 December
2022 2021
EUR000 EUR000
-------------- ---------------
Gross loans and advances to customers at amortised
cost 10,068,366 9,840,535
-------------- ---------------
Allowance for ECL for impairment of loans and
advances to customers (Note 29.5) (206,451) (285,998)
-------------- ---------------
9,861,915 9,554,537
-------------- ---------------
Loans and advances to customers measured at FVPL 282,184 281,868
-------------- ---------------
10,144,099 9,836,405
-------------- ---------------
Loans and advances to customers pledged as collateral are disclosed
in Note 31.
Additional analysis and information regarding credit risk and analysis
of the allowance for ECL of loans and advances to customers are set
out in Note 29.
17. Stock of property
The carrying amount of stock of property is determined as the lower
of cost and net realisable value. Impairment is recognised if the
net realisable value is below the cost of the stock of property.
During the six months ended 30 June 2022 an impairment loss of EUR7,364
thousand (30 June 2021: EUR7,368 thousand) was recognised in 'Impairment
net of reversals on non--financial assets' in the consolidated income
statement. At 30 June 2022, stock of EUR536,355 thousand (31 December
2021: EUR519,978 thousand) is carried at net realisable value. Additionally,
at 30 June 2022 stock of property with a carrying amount of EUR95,187
thousand (31 December 2021: EUR116,987 thousand) is carried at approximately
its fair value less costs to sell.
The stock of property includes residential properties, offices and
other commercial properties, manufacturing and industrial properties,
hotels and land (fields and plots). There is no stock of property
pledged as collateral for central bank funding facilities under Eurosystem
monetary policy operations.
The carrying amount of the stock of property is analysed in the
tables below:
30 June 31 December
2022 2021
EUR000 EUR000
------------------- -------------------
Net book value at 1 January 1,111,604 1,349,609
------------------- -------------------
Additions 17,402 34,347
------------------- -------------------
Disposals (67,608) (123,520)
------------------- -------------------
Transfers to disposal group (Note 19) - (101,978)
------------------- -------------------
Impairment (Note 10) (7,364) (46,775)
------------------- -------------------
Foreign exchange adjustments - (79)
------------------- -------------------
Net book value at 30 June/31 December 1,054,034 1,111,604
------------------- -------------------
As at 30 June 2022, there are charges against stock of property of
the Group with carrying value EUR20,989 thousand (31 December 2021:
EUR21,015 thousand).
Analysis by type and country Cyprus Greece Romania Total
30 June 2022 EUR000 EUR000 EUR000 EUR000
---------------- ------------------ -------------------- ---------------
Residential properties 70,572 17,397 32 88,001
---------------- ------------------ -------------------- ---------------
Offices and other commercial
properties 156,914 11,227 - 168,141
---------------- ------------------ -------------------- ---------------
Manufacturing and industrial
properties 32,514 15,954 48 48,516
---------------- ------------------ -------------------- ---------------
Hotels 23,874 456 - 24,330
---------------- ------------------ -------------------- ---------------
Land (fields and plots) 720,434 4,604 8 725,046
---------------- ------------------ -------------------- ---------------
Total 1,004,308 49,638 88 1,054,034
---------------- ------------------ -------------------- ---------------
31 December 2021
Residential properties 74,248 18,350 32 92,630
---------------- ------------------ ------------------- ---------------
Offices and other commercial
properties 163,789 19,462 - 183,251
---------------- ------------------ ------------------- ---------------
Manufacturing and industrial
properties 33,170 15,972 43 49,185
---------------- ------------------ ------------------- ---------------
Hotels 24,619 456 - 25,075
---------------- ------------------ ------------------- ---------------
Land (fields and plots) 755,663 4,986 814 761,463
---------------- ------------------ ------------------- ---------------
Total 1,051,489 59,226 889 1,111,604
---------------- ------------------ ------------------- ---------------
18. Prepayments, accrued income and other assets
30 June 31 December
2022 2021
EUR000 EUR000
------------------ -------------------
Financial assets
------------------ -------------------
Debtors 49,333 36,540
------------------ -------------------
Receivable relating to tax 3,696 4,558
------------------ -------------------
Deferred purchase payment consideration 304,268 299,766
------------------ -------------------
Other assets 59,865 52,600
------------------ -------------------
417,162 393,464
------------------ -------------------
Non--financial assets
------------------ -------------------
Reinsurers' share of insurance contract liabilities 58,768 55,323
------------------ -------------------
Current tax receivable 114,900 124,267
------------------ -------------------
Prepaid expenses 835 756
------------------ -------------------
Retirement benefit plan assets 1,769 -
------------------ -------------------
Other assets 28,521 42,409
------------------ -------------------
204,793 222,755
------------------ -------------------
621,955 616,219
------------------ -------------------
There were no financial assets measured at FVPL as at 30 June 2022
and 31 December 2021.
On the completion date of the sale of Project Helix 2 (the 'Transaction'),
the Group has recognised an amount of EUR381,567 thousand in other
financial assets, which represented the fair value of the deferred
consideration receivable from the Transaction (the 'DPP'). This amount
is payable in four instalments up to December 2025 and each instalment
carries interest up to each payment date. The first instalment in
the amount of EUR84,579 thousand was received in December 2021. An
amount of EUR4,314 thousand, which represents the interest income
on DPP has been recognised in the Consolidated Income Statement for
the six months ended 30 June 2022 (30 June 2021: EUR58 thousand)
within 'Interest income--Financial assets at amortised cost--Other
financial assets'. There are no other conditions attached. An amount
of EUR13,983 thousand which represents the effect of discounting
the DPP at the date of derecognition of the loan portfolio was recorded
as part of the transaction within 'Credit losses to cover credit
risk on loans and advances to customers' during the six months ended
30 June 2021. The DPP is classified as Stage 1 as at 30 June 2022
and 31 December 2021.
During the six months ended 30 June 2022, credit losses of EUR844
thousand were recognised in relation to prepayments, accrued income
and other financial assets. This includes ECL losses of EUR256 thousand
(of which EUR188 thousand relate to a partial reversal for 12--months
ECL of the DPP), and EUR588 thousand impairment losses. During the
six months ended 30 June 2021, credit losses of EUR3,739 thousand
were recognised in relation to prepayments, accrued income and other
financial assets of which EUR3,426 thousand related to 12--months
ECL of the DPP.
19. Non--current assets and disposal groups held for sale
The following non--current assets and disposal groups were classified
as held for sale as at 30 June 2022 and 31 December 2021:
30 June 31 December
2022 2021
EUR000 EUR000
---------------- -----------------
Disposal group 1 330,334 340,622
---------------- -----------------
Disposal group 2 6,956 7,921
---------------- -----------------
Freehold property 10,408 10,408
---------------- -----------------
347,698 358,951
---------------- -----------------
30 June 2022 31 December 2021
Disposal Disposal Disposal Disposal
Group 1 Group Group Group
2 1 2
------------ ------------ ---------- ------------
EUR000 EUR000 EUR000 EUR000
------------ ------------ ---------- ------------
Gross loans and advances to customers 539,675 12,131 543,663 12,126
------------ ------------ ---------- ------------
Allowance for ECL for impairment of loans
and advances to customers (Note 29.5) (299,028) (5,571) (300,608) (4,811)
------------ ------------ ---------- ------------
240,647 6,560 243,055 7,315
------------ ------------ ---------- ------------
Stock of property 84,840 396 92,246 606
------------ ------------ ---------- ------------
Investment property 4,847 - 5,321 -
------------ ------------ ---------- ------------
330,334 6,956 340,622 7,921
------------ ------------ ---------- ------------
Disposal Group 1
Disposal group 1 comprises a portfolio of loans and advances to customers
and a property portfolio (comprising stock of property and investment
property) known as Project Helix 3 ('Project Helix 3' or the 'Helix
3 Transaction').
In November 2021, the Group reached an agreement with Pacific Investment
Management Company LLC ('PIMCO') for the sale of Project Helix 3.
The Group will dispose Project Helix 3 through the transfer of the
portfolio to a licensed Cypriot Credit Acquiring Company (the CyCAC)
by BOC PCL. The shares of the CyCAC will be subsequently acquired
by certain funds affiliated with PIMCO.
The gross consideration for the transaction amounts to approximately
EUR385 million, before transaction and other costs, payable at completion.
An amount of EUR19,225 thousand was received as a deposit shortly
after the signing of the agreement (Note 23). The gross book value
of the loans and advances to customers amounted to EUR550 million
and the carrying value of the property portfolio amounted to EUR102
million as at 30 September 2021 (the reference date).
The completion of the Helix 3 Transaction is currently estimated
to occur in the second half of 2022 and remains subject to a number
of conditions, including customary regulatory and other approvals.
The disposal group has been classified as held for sale since 30
September 2021 as management is committed to sell it and has proceeded
with an active programme to complete this plan.
Disposal Group 2
Disposal group 2 comprises a portfolio of loans and advances to customers
and stock of properties in Romania known as Project Sinope ('Project
Sinope' or the 'Sinope Transaction'), classified as held for sale
since 31 December 2021.
In December 2021, the Group entered into an agreement for the sale
of Project Sinope. The transaction was completed on 24 August 2022.
An amount of EUR900 thousand was received as a deposit in the second
quarter of 2022 (Note 23).
Further analysis of the loans and advances to customers, included
in these disposal groups, is disclosed in Note 29.3.
Freehold property
Freehold property classified as held for sale as at 30 June 2022
and 31 December 2021 relates to properties which management is committed
to sell and proceeded with an active programme to complete this plan.
The disposal is expected to be completed within 12 months from the
reporting date. Freehold property classified as held for sale is
measured at fair value less cost to sell.
20. Funding from central banks
Funding from central banks comprises funding from the ECB under Eurosystem
monetary policy operations as set out in the table below:
30 June 31 December 2021
2022
EUR000 EUR000
----------------- -------------------
Targeted Longer--Term Refinancing Operations
(TLTRO I I) 2,954,808 2,969,600
----------------- -------------------
As at 30 June 2022, ECB funding amounted to EUR3 billion (31 December
2021: EUR3 billion) borrowed from various TLTRO III operations.
The interest rate applicable to the TLTRO III funding depends on the
eligible net lending during the specified periods laid out in the
terms of the ECB operation.
In recognition of the challenging credit environment during the pandemic
period, the Governing Council of the ECB announced that the interest
rate on all outstanding TLTRO III operations for the periods from
24 June 2020 to 23 June 2021 and 24 June 2021 to 23 June 2022 would
be 50 basis points below the average rate applicable in the Eurosystem's
main refinancing operations over the same period. The interest rate
on the main refinancing operations during the above periods remained
at 0%. For the counterparties whose eligible net lending reached the
lending performance thresholds, the interest rate applied over the
periods from 24 June 2020 to 23 June 2021 and 24 June 2021 to 23 June
2022 on all TLTRO III operations outstanding would be 50 basis points
below the average interest rate on the deposit facility prevailing
over the same period, and in any case not higher than minus 1%. The
deposit facility rate as at 30 June 2022 remained at minus 0.5%. BOC
PCL has exceeded the eligible net lending benchmark applicable for
both periods, and is entitled to the beneficial rate of minus 1% for
24 June 2020 to 23 June 2021 and 24 June 2021 to 23 June 2022. For
the period after 23 June 2022, the interest rate shall be the average
interest rate on the deposit facility over the life of the respective
TLTRO--III, as BOC PCL exceeded the benchmark net lending in both
reference periods. In calculating the applicable interest BOC PCL
follows a discrete approach by applying the estimated interest rate
for each period.
The maturity of TLTRO III is three years from the settlement of each
operation but there is an option available to early repay or reduce
the amounts borrowed before their respective final maturity.
Details on encumbered assets related to the above funding facilities
are disclosed in Note 31.
21. Customer deposits
30 June 31 December 2021
2022
EUR000 EUR000
---------------------- ----------------------
By type of deposit
---------------------- ----------------------
Demand 10,049,792 9,221,791
---------------------- ----------------------
Savings 2,640,108 2,423,086
---------------------- ----------------------
Time or notice 5,760,316 5,886,006
---------------------- ----------------------
18,450,216 17,530,883
---------------------- ----------------------
By geographical area
---------------------- ----------------------
Cyprus 12,837,406 11,992,960
---------------------- ----------------------
Greece 1,884,736 1,906,854
---------------------- ----------------------
United Kingdom 720,121 713,621
---------------------- ----------------------
Romania 58,612 54,306
---------------------- ----------------------
Russia 620,763 661,820
---------------------- ----------------------
Ukraine 294,218 276,248
---------------------- ----------------------
Belarus 83,410 55,738
---------------------- ----------------------
Other Countries 1,950,950 1,869,336
---------------------- ----------------------
18,450,216 17,530,883
---------------------- ----------------------
Deposits by geographical area are based on the country of passport
of the Ultimate Beneficial Owner.
30 June 31 December 2021
2022
EUR000 EUR000
--------------------- ---------------------
By currency
--------------------- ---------------------
Euro 16,529,501 15,736,030
--------------------- ---------------------
US Dollar 1,515,565 1,373,584
--------------------- ---------------------
British Pound 322,903 312,918
--------------------- ---------------------
Russian Rouble 9,838 28,539
--------------------- ---------------------
Swiss Franc 12,212 10,865
--------------------- ---------------------
Other currencies 60,197 68,947
--------------------- ---------------------
18,450,216 17,530,883
--------------------- ---------------------
30 June 31 December 2021
2022
EUR000 EUR000
--------------------- ----------------------
By customer sector
--------------------- ----------------------
Corporate 1,247,265 1,117,148
--------------------- ----------------------
Large and international corporate 820,982 631,002
--------------------- ----------------------
SMEs 900,332 866,860
--------------------- ----------------------
Retail 11,444,665 11,051,397
--------------------- ----------------------
Restructuring
--------------------- ----------------------
- Corporate 34,563 21,658
--------------------- ----------------------
- SMEs 10,413 13,091
--------------------- ----------------------
- Retail other 11,851 9,862
--------------------- ----------------------
Recoveries
--------------------- ----------------------
- Corporate 1,147 1,383
--------------------- ----------------------
International banking services 3,667,783 3,500,183
--------------------- ----------------------
Wealth management 311,215 318,299
--------------------- ----------------------
18,450,216 17,530,883
--------------------- ----------------------
22. Debt securities in issue and Subordinated liabilities
30 June 2022 31 December 2021
EUR000 EUR000 EUR000 EUR000
-------------------------------------------------------- -------------- -------------- ------------ ------------
Contractual interest Issuer Nominal value Carrying Nominal Carrying
rate value value value
--------------------- -------- -------------- -------------- ------------ ------------
Subordinated liabilities
--------------------- -------- -------------- -------------- ------------ ------------
Subordinated Tier
2 Capital Note 9.25% up to
-- January 2017 19 January 2022 BOC PCL - - 35,605 38,561
--------------------- -------- -------------- -------------- ------------ ------------
Subordinated Tier
2 Capital Note 6.625% up to
-- April 2021 23 October 2026 BOCH 300,000 311,738 300,000 301,659
--------------------- -------- -------------- -------------- ------------ ------------
300,000 311,738 335,605 340,220
-------------------------------------------------------- -------------- -------------- ------------ ------------
Debt securities
in issue
--------------------- -------- -------------- -------------- ------------ ------------
Senior Preferred 2.50% up to
Notes -- June 2021 24 June 2026 BOC PCL 300,000 298,899 300,000 302,555
--------------------- -------- -------------- -------------- ------------ ------------
BOCH and BOC PCL maintain a Euro Medium Term Note ( ) Programme with
an aggregate nominal amount up to EUR4,000 million.
Subordinated Liabilities
Subordinated Tier 2 Capital Note -- January 2017
In January 2017, BOC PCL issued a EUR250 million unsecured and subordinated
Tier 2 Capital Note under the EMTN Programme. The note was priced
at par with a coupon of 9.25% per annum payable annually up to 19
January 2022 and thereafter at the then prevailing 5--year swap rate
plus a margin of 9.176% per annum up to 19 January 2027, payable
annually. The note had a maturity date on 19 January 2027. BOC PCL
had the option to redeem the note early on 19 January 2022, subject
to applicable regulatory consents. In April 2021, BOC PCL invited
the holders of this note to tender it for purchase by BOC PCL and
following acceptance of the valid tenders of EUR207 million nominal
amount, proceeded with the re--purchase. By 31 December 2021, the
Group purchased from the open market a further EUR7 million nominal
amount of the notes, which were held by BOC PCL. On 19 January 2022,
BOC PCL exercised its option to redeem at par the remaining nominal
amount outstanding of the notes. All outstanding notes were cancelled.
The note was listed on the Luxembourg Stock Exchange's Euro Multilateral
Trading Facility (MTF) market.
Subordinated Tier 2 Capital Note -- April 2021
In April 2021, BOCH issued a EUR300 million unsecured and subordinated
Tier 2 Capital Note under the EMTN Programme. The note was priced
at par with a coupon of 6.625% per annum payable annually in arrears
and resettable on 23 October 2026 at the then prevailing 5--year
swap rate plus a margin of 6.902% per annum up to 23 October 2031,
payable annually. The note matures on 23 October 2031. BOCH has the
option to redeem the note early on any day during the six--month
period from 23 April 2026 to 23 October 2026, subject to applicable
regulatory consents. The note is listed on the Luxembourg Stock Exchange's
Euro MTF market.
The fair value of the Subordinated liabilities as at 30 June 2022
and 31 December 2021 is disclosed in Note 15.
Debt securities in issue
Senior Preferred Notes -- June 2021
In June 2021, BOC PCL issued a EUR300 million senior preferred note
under the EMTN Programme. The note was priced at par with a fixed
coupon of 2.50% per annum, payable annually in arrears and resettable
on 24 June 2026. The note matures on 24 June 2027. BOC PCL has the
option to redeem the note early on 24 June 2026, subject to applicable
regulatory consents. The note is listed on the Luxembourg Stock Exchange's
Euro MTF market. The note complies with the criteria for the minimum
requirement for own funds and eligible liabilities (MREL) and contributes
towards BOC PCL's MREL requirements.
The fair value of the debt securities in issue as at 30 June 2022
and 31 December 2021 is disclosed in Note 15.
23. Accruals, deferred income, other liabilities and other provisions
30 June 31 December
2022 2021
EUR000 EUR000
------------------- ------------------
Income tax payable and related provisions 13,608 11,168
------------------- ------------------
Special defence contribution payable 145 462
------------------- ------------------
Retirement benefit plans liabilities - 1,673
------------------- ------------------
Provisions for financial guarantees and commitments 21,518 21,945
------------------- ------------------
Liabilities for investment--linked contracts under
administration 40,870 33,809
------------------- ------------------
Accrued expenses and other provisions 49,705 79,482
------------------- ------------------
Deferred income 17,872 16,441
------------------- ------------------
Items in the course of settlement 87,537 64,024
------------------- ------------------
Lease liabilities 30,966 33,981
------------------- ------------------
Advances received for disposal group held for sale
(Note 19) 20,125 19,225
------------------- ------------------
Other liabilities 111,771 79,767
------------------- ------------------
394,117 361,977
------------------- ------------------
Other liabilities include an amount of EUR26,476 thousand (31 December
2021: EUR26,476 thousand) relating to the annual guarantee fee for
the conversion of DTA into tax credits (Note 11) and an amount of
EUR20,101 thousand (31 December 2021: EUR6,642 thousand) relating
to card processing transactions.
24. Share capital
30 June 2022 31 December 2021
Number of Number of
shares (thousand) EUR000 shares (thousand) EUR000
------------------ ------------------ ----------------
Authorised
------------------ --------------- ------------------ ----------------
Ordinary shares of EUR0.10 each 10,000,000 1,000,000 10,000,000 1,000,000
------------------ --------------- ------------------ ----------------
Issued
------------------ --------------- ------------------ ----------------
1 January and 31 December 446,200 44,620 446,200 44,620
------------------ --------------- ------------------ ----------------
Authorised and issued share capital
All issued ordinary shares carry the same rights.
There were no changes to the authorised or issued share capital during
the six months ended 30 June 2022 and the year ended 31 December
2021.
Share premium reserve
There were no changes to the share premium reserve during the six
months ended 30 June 2022 and the year ended 31 December 2021.
Treasury shares of the Company
The consideration paid, including any directly attributable incremental
costs (net of income taxes), for shares of the Company held by entities
controlled by the Group is deducted from equity attributable to the
owners of the Company as treasury shares, until these shares are
cancelled or reissued. No gain or loss is recognised in the consolidated
income statement on the purchase, sale, issue or cancellation of
such shares.
The life insurance subsidiary of the Group, as at 30 June 2022, held
a total of 142 thousand ordinary shares of the Company of a nominal
value of EUR0.10 each (31 December 2021: 142 thousand ordinary shares
of a nominal value of EUR0.10 each), as part of its financial assets
which are invested for the benefit of insurance policyholders. The
cost of acquisition of these shares was EUR21,463 thousand (31 December
2021: EUR21,463 thousand).
Share--based payments
During the Annual General Meeting of the shareholders of the Company
which took place on 20 May 2022, a special resolution was approved
for the establishment and implementation of a share based Long Term
Incentive Plan of Bank of Cyprus Holdings Public Limited Company
(the '2022 LTIP'). The maximum number of shares that may be issued
pursuant to the 2022 LTIP until the tenth anniversary of the relevant
resolution shall not exceed 5% of the issued ordinary share capital
of the Company, as at the date of the resolution (being 22,309,996
ordinary shares of EUR0.10 each), as adjusted for any issuance or
cancellation of shares subsequent to the date of the resolution (excluding
any issuances of shares pursuant to the 2022 LTIP). The 2022 LTIP
provides for an award in the form of ordinary shares based on certain
performance conditions. Performance will be measured over a 3 year
period and the performance conditions will be set by the Human Resources
& Remuneration Committee each year and may be differentiated to reflect
the Company's strategic targets, at its discretion. Performance will
be assessed against an evaluation scorecard consistent with the Group's
Medium Term Strategic Targets containing both financial and non--financial
objectives, and including the areas of: (i) Profitability; (ii) Asset
quality; (iii) Capital adequacy; (iv) Risk control & compliance;
and (v) Environmental, Social and Governance ('ESG') targets.
No awards have been granted under the 2022 LTIP to any employees
of the Group as at 30 June 2022.
The pre--existing Share Option Plan, which was operating at the level
of the Company, has been superseded by the 2022 LTIP.
Other equity instruments
30 June 31 December
2022 2021
EUR000 EUR000
-------------- ---------------
Reset Perpetual Additional Tier 1 Capital Securities 220,000 220,000
-------------- ---------------
In December 2018 the Company issued EUR220 million Subordinated Fixed
Rate Reset Perpetual Additional Tier 1 Capital Securities (AT1).
AT1 constitutes an unsecured and subordinated obligation of the Company.
The coupon is at 12.50% and is payable semi--annually. During the
six months ended 30 June 2022, a coupon payment to AT1 holders was
made amounting to EUR13,750 thousand and has been recognised in retained
earnings (30 June 2021: EUR13,750 thousand). The Company may elect
to cancel any interest payment for an unlimited period, on a non--cumulative
basis, whereas it mandatorily cancels interest payment under certain
conditions. AT1 is perpetual and has no fixed date for redemption
but can be redeemed (in whole but not in part) at the Company's option
on the fifth anniversary of the issue date and each subsequent fifth
anniversary subject to the prior approval of the regulator. The AT1
notes are listed on the Luxembourg Stock Exchange's Euro Multilateral
Trading Facility (MTF) market.
25. Pending litigation, claims, regulatory and other matters
The Group, in the ordinary course of business, is involved in various
disputes and legal proceedings and is subject to enquiries and examinations,
requests for information, audits, investigations, legal and other
proceedings by regulators, governmental and other public bodies,
actual and threatened, relating to the suitability and adequacy of
advice given to clients or the absence of advice, lending and pricing
practices, selling and disclosure requirements, record keeping, filings
and a variety of other matters. In addition, as a result of the deterioration
of the Cypriot economy and banking sector in 2012 and the subsequent
restructuring of BOC PCL in 2013 as a result of the bail in Decrees,
BOC PCL is subject to a large number of proceedings and investigations
that either precede, or result from the events that occurred during
the period of the bail--in Decrees. There are also situations where
the Group may enter into a settlement agreement. This may occur only
if such settlement is in BOC PCL's interest (such settlement does
not constitute an admission of wrongdoing) and only takes place after
obtaining legal advice and all approvals by the appropriate bodies
of management.
Apart from what is described below, the Group considers that none
of these matters are material, either individually or in aggregate.
The Group has not disclosed an estimate of the potential financial
effect on its contingent liabilities arising from these matters where
it is not practicable to do so, because it is too early or the outcome
is too uncertain or, in cases where it is practicable, where disclosure
could prejudice conduct of the matters. Provisions have been recognised
for those cases where the Group is able to estimate probable losses
(Note 6.4). Where an individual provision is material, the fact that
a provision has been made is stated. Any provision recognised does
not constitute an admission of wrongdoing or legal liability. While
the outcome of these matters is inherently uncertain, management
believes that, based on the information available to it, appropriate
provisions have been made in respect of legal proceedings and regulatory
and other matters as at 30 June 2022 and hence it is not believed
that such matters, when concluded, will have a material impact upon
the financial position of the Group.
25.1 Pending litigation and claims
Investigations and litigation relating to securities issued by BOC
PCL
A number of institutional and retail customers have filed various
separate actions against BOC PCL alleging that BOC PCL is guilty
of misselling in relation to securities issued by BOC PCL between
2007 and 2011. Remedies sought include the return of the money investors
paid for these securities. Claims are currently pending before the
courts in Cyprus and in Greece, as well as the decisions and fines
imposed upon BOC PCL in related matters by Cyprus Securities and
Exchange Commission (CySEC) and/or Hellenic Capital Market Commission
(HCMC).
The bonds and capital securities in respect of which claims have
been brought are the following: 2007 Capital Securities, 2008 Convertible
Bonds, 2009 Convertible Capital Securities (CCS) and 2011 Convertible
Enhanced Capital Securities (CECS).
BOC PCL is defending these claims, particularly with respect to institutional
investors and retail purchasers who received investment advice from
independent investment advisors. In the case of retail investors,
if it can be demonstrated that the relevant BOC PCL's officers 'persuaded'
them to proceed with the purchase and/or purported to offer 'investment
advice', BOC PCL may face significant difficulties. To date, a number
of cases have been tried in Greece. BOC PCL has appealed against
any such cases which were not ruled in its favour. The resolution
of the claims brought in the courts of Greece is expected to take
a number of years.
So far three capital securities cases have been adjudicated in favour
of BOC PCL and three cases have been adjudicated against BOC PCL
at Areios Pagos (Supreme Court of Greece). Those cases which were
decided in favour of BOC PCL ruled in effect that BOC PCL can rely
on the defence of frustration (i.e. intervening event out of the
control of BOC PCL, in this case BOC PCL's resolution and recapitalisation
through the bail in of deposits) to show that the risks associated
with the sale of the capital securities because of the consequences
of the bail in were unforeseeable. The cases that BOC PCL has won
will be retried by the Court of Appeal as per the direction of the
Supreme Court. One of the said cases has already been retried by
the Court of Appeal and the ruling was in favour of BOC PCL primarily
on the merits of the case and at a secondary level per the direction
of the Supreme Court. There has been a new petition for annulment
against this decision of the Court of Appeal and the case will be
retried before the Supreme Court in 2023. The two cases that BOC
PCL has lost will not be retried and are therefore deemed as concluded.
In Cyprus thirteen judgments have been issued so far with regards
to BOC PCL capital securities. Eight of the said judgments have been
issued in favour of BOC PCL (dismissing the plaintiffs' claims) and
five of them against BOC PCL. BOC PCL has filed appeals with regards
to three of the cases where the judgment was issued against it and
will file an appeal to the fourth case. In five of the eight cases
that BOC PCL won, the plaintiffs have filed an appeal. It is to be
noted that the statutory limitation period for filing claims with
respect to this and other matters for which the cause of action arose
prior and up to 31 December 2015, expired on 31 December 2021.
Provision has been made based on management's best estimate of probable
outflows for capital securities related litigation.
Bail--in related litigation
Depositors
A number of BOC PCL's depositors, who allege that they were adversely
affected by the bail--in, filed claims against BOC PCL and other
parties (such as the CBC and the Ministry of Finance of Cyprus) including
against BOC PCL as the alleged successor of Laiki Bank on the grounds
that, inter alia, the 'Resolution Law of 2013' and the Bail--in Decrees
were in conflict with the Constitution of the Republic of Cyprus
and the European Convention on Human Rights. They are seeking damages
for their alleged losses resulting from the bail--in of their deposits.
BOC PCL is defending these actions.
BOC PCL has won two cases with regards to bail in related litigation.
The specifics of the cases concerned alleged failure to follow instructions
prior to the bail--in. The plaintiffs have filed appeals with respect
to both judgments.
BOC PCL also won three bail--in decree related cases two of which
during the six months ended 30 June 2022. The court essentially ruled
that the measures that the government implemented were necessary
to prevent the collapse of the financial sector, which would have
detrimental consequences for the country's economy. Under the circumstances
the government could rely on the doctrine of necessity when it imposed
the bail--in. Up to the date of the Consolidated Financial Statements
an appeal has been filed with respect to one of the judgments.
BOC PCL lost one bail--in wrongful application related case in March
2022. BOC PCL has filed an appeal with respect to this judgment.
The court issued its decision on the ground that the disputed account
was not a provident fund account and the bail--in was wrongfully
applied to this account.
BOC PCL has also lost another BOC bail--in 'wrongful application'
case in July 2022. The court issued its decision on the ground that
the deposit account that the plaintiff maintained with BOC PCL which
as per BOC PLC practice had been blocked against the future payment
under a Letter of Credit, should not have been bailed in irrespective
of the fact that the payment under the Letter of Credit had not yet
been made. BOC PCL is planning on filing an appeal to this judgment.
Shareholders
Numerous claims were filed by shareholders in 2013 against the Government
and the CBC before the Supreme Court in relation to the dilution
of their shareholding as a result of the recapitalisation pursuant
to the Resolution Law and the Bail--in Decrees issued thereunder.
These proceedings sought the cancellation and setting aside of the
Bail--in Decrees as unconstitutional and/or unlawful and/or irregular.
BOC PCL appeared in these proceedings as an interested party to support
the position that the cases should be adjudicated upon in the context
of private law. The Supreme Court ruled in these cases in October
2014 that the proceedings fall within private and public law and
thus fall within the jurisdiction of the District Courts.
As at the present date, both the Resolution Law and the Bail--in
Decrees have not been annulled by a court of law and thus remain
legally valid and in effect. A number of actions for damages have
been filed and are still being filed with the District Courts of
Cyprus alleging either the unconstitutionality of the Resolution
Law and the Bail--in Decrees, or a misapplication of same by BOC
PCL (as regards the way and methodology whereby such Decrees have
been implemented), or that BOC PCL failed to follow instructions
promptly prior to the bail--in coming into force. BOC PCL intends
to contest all of these claims.
Legal position of the Group
All of the above claims are being vigorously disputed by the Group,
in close consultation with the appropriate state and governmental
authorities. The position of the Group is that the Resolution Law
and the Decrees take precedence over all other laws. As matters now
stand, both the Resolution Law and the Decrees issued thereunder
are constitutional and lawful, in that they were properly enacted
and have not so far been annulled by any court.
Provident fund case
In December 2015, the Bank of Cyprus Employees Provident Fund (the
Provident Fund) filed an action against BOC PCL claiming EUR70 million
allegedly owed as part of BOC PCL's contribution by virtue of an
agreement with the Union dated 31 December 2011. Based on facts currently
known, it is not practicable at this time for BOC PCL to predict
the resolution of this matter, including the timing or any possible
impact on BOC PCL.
Employment litigation
Former employees of the Group have instituted a number of employment
claims including unfair dismissals and one claim for Provident Fund
entitlements against BOC PCL and the Trustees of the Provident Fund.
In July 2021 the claim for Provident Fund entitlements was settled.
The Group does not consider that the pending cases in relation to
employment will have a material impact on its financial position.
Additionally, a number of former employees have filed claims against
BOC PCL contesting entitlements received relating to the various
voluntary exit plans. As at the reporting date, the Group does not
expect that these actions will have a material impact on its financial
position.
Swiss Francs loans litigation in Cyprus and the UK
number of actions have been instituted against BOC PCL by borrowers
who obtained loans in foreign currencies (mainly Swiss Francs). The
central allegation in these cases is that BOC PCL misled these borrowers
and/or misrepresented matters, in violation of applicable law. BOC
PCL is contesting the said proceedings. The Group does not expect
that these actions will have a material impact on its financial position.
UK property lending claims
BOC PCL is the defendant in certain proceedings alleging that BOC
PCL is legally responsible for allegedly, inter alia, advancing and
misselling loans for the purchase by UK nationals of property in
Cyprus. The proceedings in the UK are currently stayed in order for
the parties to have time to negotiate possible settlements. The Group
does not expect that these negotiations will lead to outflows for
the Group.
Banking business cases
There is a number of banking business cases where the amounts claimed
are significant. These cases primarily concern allegations as to
BOC PCL's standard policies and procedures allegedly resulting to
damages and other losses for the claimants. Further, there are several
other banking claims, where the amounts involved are not as significant.
Management has assessed either the probability of loss as remote
and/or does not expect any future outflows with respect to these
cases to have a material impact on the financial position of the
Group. Such matters arise as a result of the Group's activities and
management appropriately assesses the facts and the risks of each
case accordingly.
General criminal investigations and proceedings
The Attorney General and the Cypriot Police (the Police) are conducting
various investigations and inquiries following and relating to the
financial crisis which culminated in March 2013. BOC PCL is cooperating
fully with the Attorney General and the Police and is providing all
information requested of it. Based on the currently available information,
the Group is of the view that any further investigations or claims
resulting from these investigations will not have a material impact
on its financial position.
Others
An investigation is in process related to potentially overstated
and/or fictitious claims paid by the non--life insurance subsidiary
of the Group. The information usually required by IAS 37 'Provisions,
Contingent Liabilities and Contingent Assets' is not disclosed on
the grounds that it is expected to seriously prejudice the outcome
of the investigation and/or the possible taking of legal action.
Based on the information available at present, management considers
that it is unlikely for this matter to have a material adverse impact
on the financial position and capital adequacy of the non--life insurance
subsidiary and thereby the Group, also taking into account that it
is virtually certain that compensations will be received from a relevant
insurance coverage, upon the settlement of any obligation that may
arise.
25.2 Regulatory matters
The Hellenic Capital Market Commission (HCMC) Investigation
The HCMC is currently in the process of investigating matters concerning
the Group's investment in Greek Government Bonds from 2009 to 2011,
including, inter alia, related non--disclosure of material information
in BOC PCL's CCS and CECS and rights issue prospectus (tracking the
investigation carried out by CySEC in 2013), Greek government bonds'
reclassification, ELA disclosures and allegations by some investors
regarding BOC PCL's non--compliance with Markets in Financial Instruments
Directive (MiFID) in respect of investors' direct investments in
Greek Government Bonds.
A specific estimate of the outcome of the investigations or of the
amount of possible fines cannot be given at this stage, though it
is not expected that any resulting liability or damages will have
a material impact on the financial position of the Group.
Labour Inspection Body of Greece
As for other potential matters involving the exposure of BOC PCL
to losses, twelve fines have been imposed by the Labour Inspection
Body of Greece in prior years relating to the years prior to 2013,
which amount in total to EUR84 thousand.
The Cyprus Securities and Exchange Commission (CySEC) Investigations
CySEC has concluded (in two stages) during 2013 and 2014 its investigation
with respect to BOC PCL exposure to Greek Government Bonds, non--disclosure
of material information and other corporate governance deficiencies
relating to the said exposure. In this respect, CySEC has issued
two decisions, coming to the conclusion that BOC PCL was in breach
of certain laws regarding disclosure of information. At all times,
BOC PCL had filed recourses before the Administrative Court regarding
the decisions of CySEC and the fines imposed upon it.
In May 2022, the ruling of the Administrative Court in relation to
one of the recourses was issued, whereby the court found that the
constitution of the CySEC Board was not flawed. A fine of EUR950
thousand was imposed upon BOC PCL. BOC PCL filed an appeal in June
2022. Relevant provisions were made since prior years for the said
cases.
As at 30 June 2022 and 31 December 2021 there were no pending CySEC
investigations against BOC PCL.
Central Bank of Cyprus (CBC)
The CBC has carried out certain investigations to assess compliance
of BOC PCL under the anti--money laundering (AML) legislation which
was in place during years 2008--2015 and 2015--2018.
Following the investigations and the on--site audit findings, the
CBC concluded on 27 January 2021 that in the case of AML legislation
2008--2015 BOC PCL was in breach of certain articles of the said
legislation and prima facie, failed to act in accordance with certain
provisions of the AML/counter terrorism financing (CTF) Law and the
CBC AML/CTF Directive. In October 2021 a fine of EUR277 thousand
was imposed upon BOC PCL. BOC PCL paid for a discounted fine and
has filed a recourse against this decision and fine.
Following the investigation and the on--site examination, the CBC
concluded with regards to the files and transactions related to years
2015--2018, that BOC PCL was in breach of certain articles of the
legislation. In December 2021, a fine of EUR790 thousand was imposed
upon BOC PCL. BOC PCL paid for a discounted fine and has filed a
recourse against the decision and the fine.
The CBC had conducted an investigation in the past into BOC PCL's
issuance of capital securities and concluded that BOC PCL breached
certain regulatory requirements concerning the issuance of Convertible
Capital Securities (Perpetual) in 2009, but not in relation to the
CECS in 2011. The CBC had, in 2013, imposed a fine of EUR4 thousand
upon BOC PCL, who filed a recourse. The Administrative Court cancelled
both the CBC's decision and the fine that was imposed upon BOC PCL
in a respective judgment dated in 2020. CBC decided to re--examine
this matter and to re--open the investigation.
The CBC has decided that between the reporting date of 31 December
2014 and until the reporting date of 31 December 2017 BOC PCL was
in breach of the requirements of the Directive on the Computation
of Prudential Liability in Euro, of the Directive on the Prudential
Liability in foreign currencies and of the CBC Directive on Governance
and Management Arrangements in Credit Institutions. BOC PCL was given
the opportunity to express its views with regards to the identified
failures and the possible imposition of sanctions. BOC PCL has submitted
its views and representations and CBC will decide on the matter.
European Central Bank (ECB) Investigation
In July 2021, BOC PCL was notified in writing by the ECB that, based
on an investigation carried out by ECB's investigating unit, BOC
PCL was in breach of an ECB decision of September 2016. The alleged
breach related to the requirement imposed on BOC PCL to seek the
prior approval of the ECB for any transfer of capital or liquidity
to any subsidiary company. The Governing Council of the ECB informed
BOC PCL in February 2022 of its decision to impose an administrative
penalty of EUR575 thousand. BOC PCL proceeded with the payment of
the fine.
Commission for the Protection of Competition Investigation (CPC)
In April 2014, following an investigation which began in 2010, CPC
issued a statement of objections, alleging violations of Cypriot
and EU competition law relating to the activities and/or omissions
in respect of card payment transactions by, among others, BOC PCL
and JCC Payment Systems Ltd (JCC), a card processing business currently
75% owned by BOC PCL. BOC PCL is expecting the final conclusion of
this matter and has provided for it accordingly.
There was also an allegation concerning BOC PCL's arrangements with
American Express, namely that such exclusive arrangements violated
Cypriot and EU competition law. On both matters, the CPC has concluded
that BOC PCL (in common with other banks and JCC) has breached the
relevant provisions of the applicable law for the protection of competition.
In May 2017, the CPC imposed a fine of EUR18 million upon BOC PCL
and BOC PCL filed a recourse against the decision and the fine. The
payment of the fine had been stayed pending the final outcome of
the recourse. In June 2018, the Administrative Court accepted BOC
PCL's position and cancelled the decision as well as the fine imposed
upon BOC PCL. During 2018, the Attorney General has filed an appeal
before the Supreme court with respect to such decision. Until a judgment
is issued by the Supreme Court, the decision of the CPC remains annulled
and there is no subsisting fine upon BOC PCL. The said appeal is
still pending as at the date of these Consolidated Financial Statements.
In 2019, the CPC initiated an ex officio investigation with respect
to unfair contract terms and into the contractual arrangements/facilities
offered by BOC PCL for the period from 2012 to 2016. To date no charges
have been put forward nor have any formal proceedings been instituted
against BOC PCL in this case. This investigation is currently at
a very early stage to predict its outcome and no formal process has
been initiated.
Association for the Protection of Bank Borrowers (CYPRODAT)
CYPRODAT filed a complaint with the Commission for the Protection
of Competition (CPC) in January 2022, claiming that BOC PCL and another
bank have concerted in practices regarding the recent revisions of
their commissions and charges. It also filed an application for an
interim order which, if successful, would essentially freeze the
implementation of the revised commissions and charges. The application
for interim order was rejected by the CPC, however, the CPC reverted
in April 2022 to inform BOC PCL of the initiation of an investigation
with respect to this matter. This investigation is currently at a
very early stage to predict its outcome.
Commissioner for the Protection of Personal Data
The Commissioner for the Protection of Personal Data has informed
BOC PCL that based on the evidence submitted, there is a breach of
Regulation 2016/679 on the protection of natural persons with regards
to the processing of personal data and on the free movement of such
data. The breach concerned the exchange of data under the sale of
a portfolio of credit facilities which did not relate to the transaction.
A fine of EUR17 thousand was imposed on BOC PCL.
BOC PCL informed the Commissioner on the procedures to follow to
avoid such oversights in the future and the measures it has taken
to remedy the specific breaches.
Consumer Protection Service (CPS)
In July 2017, CPS imposed a fine of EUR170 thousand upon BOC PCL
after concluding an ex officio investigation regarding some terms
in both BOC PCL's and Marfin Popular Bank's loan documentation, that
were found to constitute unfair commercial practices. Decisions of
the CPS (according to rulings of the Administrative Court) are not
binding but merely an expression of opinion. Against this decision,
BOC PCL has filed a recourse before the Administrative Court which
has not yet issued its judgement. The recourse is still pending as
at the date of these Consolidated Financial Statements.
In March 2020, BOC PCL has been served with an application by the
director of CPS through the Attorney General seeking for an order
of the court, with immediate effect, the result of which will be
for BOC PCL to cease the use of a number of terms in the contracts
of BOC PCL which are deemed to be unfair under the said order. The
said terms relate to contracts that had been signed during 2006--2007.
Furthermore, the said application seeks for an order ordering BOC
PCL to undertake measures to remedy the situation. BOC PCL will take
all necessary steps for the protection of its interests. This matter
is still pending before the court as at the date of these Consolidated
Financial Statements.
In April 2021, the Director of the Consumer Protection Service filed
an application for the issuance of a court order against BOC PCL,
prohibiting the use of a number of contractual terms included in
BOC PCL's consumer contracts and the amendment of any such contracts
(present and future) so as to remove such unfair terms. This matter
is still pending before the court as at the date of these Consolidated
Financial Statements.
BOC PCL received a letter in July 2021 from CPS, initiating an ex
officio investigation under the Distance Marketing of Financial Services
to Consumers Law, with respect to the services and products of BOC
PCL for which the contract between BOC PCL and the consumer is entered
into online via BOC PCL's website.
BOC PCL received another letter in July 2021 from CPS, initiating
an investigation with respect to an alleged commercial practice of
BOC PCL of promoting a product.
The investigations are currently at a very early stage to predict
their outcome.
Cyprus Consumers' Association (CCA)
In March 2021, BOC PCL was served with an application filed by the
CCA for the issuance of a court order prohibiting the use of a number
of contractual terms included in BOC PCL's consumer contracts and
the amendment of any such contracts (present and future) so as to
remove such terms deemed as unfair. The said contractual terms were
determined as unfair pursuant to the decisions issued by the Consumer
Protection Service of the Ministry of Energy, Commerce, Industry
and Tourism against BOC PCL in 2016 and 2017. BOC PCL will take all
necessary steps for the protection of its interests. This matter
is still pending before the court as at the date of these Consolidated
Financial Statements.
The new Law on Consumer Protection brings under one umbrella the
existing legislation on unfair contract terms and practices with
some enhanced powers vested in the Consumer Protection Service i.e.
power to impose increased fines which are immediately payable. The
new Law on Consumer Protection has a retrospective effect in that
it also applies to all contracts/practices entered into and/or terminated
prior to this law coming into effect as opposed to contracts/practices
which are only entered into/adopted as from the date of publication
of the new Law on Consumer Protection.
There are many factors that may affect the range of outcomes, and
the resulting financial impact, of these matters, is unknown.
UK regulatory matters
As part of the agreement for the sale of Bank of Cyprus UK Ltd, a
liability with regards to UK regulatory matters remains an obligation
for settlement by the Group. The level of the provision represents
the best estimate of all probable outflows arising from customer
redress based on information available to management.
25.3 ther matters
Other matters include among others, provisions for various other
open examination requests by governmental and other public bodies,
legal matters and provisions for warranties and indemnities related
to the disposal process of certain operations of the Group.
The provisions for pending litigation, claims, regulatory and other
matters do not include insurance claims arising in the ordinary course
of business of the Group's insurance subsidiaries as these are included
in 'Insurance liabilities'.
25.4 Provisions for pending litigation, claims, regulatory and other matters
Pending litigation Regulatory Other matters Total
and claims matters (Note 25.3)
(Note 25.1) (Note 25.2)
2022 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- -----------------
1 January 57,844 16,415 29,849 104,108
------------------- ------------------- ------------------- -----------------
Net increase in provisions
including
unwinding of discount (Note
9) 1,086 950 - 2,036
------------------- ------------------- ------------------- -----------------
Utilisation of provisions (78) (759) - (837)
------------------- ------------------- ------------------- -----------------
Release of provisions (Note
9) (392) - (100) (492)
------------------- ------------------- ------------------- -----------------
Foreign exchange adjustments - (22) - (22)
------------------- ------------------- ------------------- -----------------
30 June 58,460 16,584 29,749 104,793
------------------- ------------------- ------------------- -----------------
2021
1 January 67,439 12,305 43,871 123,615
------------------- ------------------- ------------------- -------------------
Net increase in provisions
including
unwinding of discount (Note
9) 1,505 2,890 34,270 38,665
------------------- ------------------- ------------------- -------------------
Utilisation of provisions (6,539) - - (6,539)
------------------- ------------------- ------------------- -------------------
Foreign exchange adjustments - 24 - 24
------------------- ------------------- ------------------- -------------------
30 June 62,405 15,219 78,141 155,765
------------------- ------------------- ------------------- -------------------
Provisions for pending litigation, claims, regulatory and other matters
recorded in the consolidated income statement (Note 9) during the
six months ended 30 June 2021 amounting to EUR10,660 thousand, also
include an amount of EUR841 thousand representing an amount recovered
from plaintiffs directly recognised in the consolidated income statement.
Some information required by the IAS 37 'Provisions, Contingent Liabilities
and Contingent Assets' is not disclosed on the grounds that it can
be expected to prejudice seriously the outcome of the litigation or
the outcome of the negotiation in relation to provisions for warranties
and indemnities related to the disposal process of certain operations
of the Group.
An increase by 5% in the probability of loss rate for pending litigation
and claims (31 December 2021: 5%) with all other variables held constant,
would lead to an increase in the actual provision by EUR6,983 thousand
at 30 June 2022 (31 December 2021: increase by EUR7,097 thousand).
26. Contingent liabilities and commitments
The Group, as part of its disposal process of certain of its operations,
has provided various representations, warranties and indemnities
to the buyers. These relate to, among other things, the ownership
of the loans, the validity of the liens, tax exposures and other
matters agreed with the buyers. As a result, the Group may be obliged
to compensate the buyers in the event of a valid claim by the buyers
with respect to the above representations, warranties and indemnities.
A provision has been recognised, based on management's best estimate
of probable outflows, where it was assessed that such an outflow
is probable.
Capital commitments for the acquisition of property, equipment and
intangible assets as at 30 June 2022 amount to EUR17,454 thousand
(31 December 2021: EUR18,678 thousand).
27. Cash and cash equivalents
Cash and cash equivalents comprise:
30 June 31 December
2022 2021
EUR000 EUR000
-------------- ---------------
Cash and non--obligatory balances with central
banks 9,729,679 9,063,896
-------------- ---------------
Loans and advances to banks with original maturity
less than three months 248,313 191,314
-------------- ---------------
9,977,992 9,255,210
-------------- ---------------
Analysis of cash and balances with central banks and loans and
advances to banks
30 June 31 December
2022 2021
EUR000 EUR000
-------------- ---------------
Cash and non--obligatory balances with central
banks 9,729,679 9,063,896
-------------- ---------------
Obligatory balances with central banks 174,870 166,987
-------------- ---------------
Total cash and balances with central banks 9,904,549 9,230,883
-------------- ---------------
Loans and advances to banks with original maturity
less than three months 248,313 191,314
Restricted loans and advances to banks 63,995 100,318
--------------- ---------------
Total loans and advances to banks 312,308 291,632
--------------- ---------------
Restricted loans and advances to banks include collaterals under derivative
transactions of EUR3,100 thousand (31 December 2021: EUR41,068 thousand)
which are not immediately available for use by the Group, but are
released once the transactions are terminated.
28. Analysis of assets and liabilities by expected maturity
30 June 2022 31 December 2021
Less than Over one Total Less than Over one Total
one year year one year year
---------------- ---------------- ---------------- --------------
Assets EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------------- ---------------- ------------- ---------------- ---------------- --------------
Cash and
balances
with central
banks 9,729,679 174,870 9,904,549 9,063,896 166,987 9,230,883
---------------- ---------------- ------------- ---------------- ---------------- --------------
Loans and
advances
to banks 248,313 63,995 312,308 191,314 100,318 291,632
---------------- ---------------- ------------- ---------------- ---------------- --------------
Derivative
financial
assets 12,240 25,910 38,150 4,556 2,097 6,653
---------------- ---------------- ------------- ---------------- ---------------- --------------
Investments 253,907 1,848,770 2,102,677 366,420 1,772,743 2,139,163
---------------- ---------------- ------------- ---------------- ---------------- --------------
Loans and
advances
to customers 1,042,690 9,101,409 10,144,099 1,018,312 8,818,093 9,836,405
---------------- ---------------- ------------- ---------------- ---------------- --------------
Life insurance
business
assets
attributable
to
policyholders 6,214 527,482 533,696 14,111 537,686 551,797
---------------- ---------------- ------------- ---------------- ---------------- --------------
Prepayments,
accrued
income and
other
assets 150,722 471,233 621,955 139,988 476,231 616,219
---------------- ---------------- ------------- ---------------- ---------------- --------------
Stock of
property 243,889 810,145 1,054,034 267,480 844,124 1,111,604
---------------- ---------------- ------------- ---------------- ---------------- --------------
Deferred tax
assets 37,909 227,521 265,430 37,909 227,572 265,481
---------------- ---------------- ------------- ---------------- ---------------- --------------
Property,
equipment
and
intangible
assets - 417,096 417,096 - 436,164 436,164
---------------- ---------------- ------------- ---------------- ---------------- --------------
Investment
properties 20,509 81,531 102,040 32,139 85,606 117,745
---------------- ---------------- ------------- ---------------- ---------------- --------------
Non--current
assets
and disposal
groups
held for sale 347,698 - 347,698 358,951 - 358,951
---------------- ---------------- ------------- ---------------- ---------------- --------------
12,093,770 13,749,962 25,843,732 11,495,076 13,467,621 24,962,697
---------------- ---------------- ------------- ---------------- ---------------- --------------
Liabilities
---------------- ---------------- ------------- ---------------- ---------------- --------------
Deposits by
banks 156,338 335,684 492,022 100,530 356,509 457,039
---------------- ---------------- ------------- ---------------- ---------------- --------------
Funding from
central
banks 979,625 1,975,183 2,954,808 2,969,600 - 2,969,600
---------------- ---------------- ------------- ---------------- ---------------- --------------
Derivative
financial
liabilities 4,342 5,143 9,485 4,830 27,622 32,452
---------------- ---------------- ------------- ---------------- ---------------- --------------
Customer
deposits 7,257,960 11,192,256 18,450,216 6,909,913 10,620,970 17,530,883
---------------- ---------------- ------------- ---------------- ---------------- --------------
Insurance
liabilities 101,257 588,541 689,798 91,758 644,443 736,201
---------------- ---------------- ------------- ---------------- ---------------- --------------
Accruals,
deferred
income and
other
liabilities
and
pending
litigation,
claims,
regulatory
and other
matters 332,889 166,021 498,910 273,940 192,145 466,085
---------------- ---------------- ------------- ---------------- ---------------- --------------
Debt
securities
in issue and
subordinated
liabilities - 610,637 610,637 38,561 604,214 642,775
---------------- ---------------- ------------- ---------------- ---------------- --------------
Deferred tax
liabilities - 45,235 45,235 937 45,498 46,435
---------------- ---------------- ------------- ---------------- ---------------- --------------
8,832,411 14,918,700 23,751,111 10,390,069 12,491,401 22,881,470
---------------- ---------------- ------------- ---------------- ---------------- --------------
The main assumptions used in determining the expected maturity of
assets and liabilities are set out below.
Cash and balances with central banks are classified in the relevant
time band based on the contractual maturity, with the exception of
obligatory balances with central banks which are classified in the
'Over one year' time band.
The investments are classified in the relevant time band based on
expectations as to their realisation. In most cases this is the maturity
date, unless there is an indication that the maturity will be prolonged
or there is an intention to sell, roll or replace the security with
a similar one.
Performing loans and advances to customers in Cyprus are classified
based on the contractual repayment schedule. Overdraft accounts are
classified in the 'Over one year' time band. The Stage 3 Loans are
classified in the 'Over one year' time band except cash flows from
expected receipts which are included within time bands, according
to historic amounts of receipts in the recent months.
Stock of property is classified in the relevant time band based on
expectations as to its realisation.
A percentage of customer deposits maturing within one year is classified
in the 'Over one year' time band, based on the observed behavioural
analysis.
The expected maturity of all prepayments, accrued income and other
assets and accruals, deferred income and other liabilities is the
same as their contractual maturity. If they do not have a contractual
maturity, the expected maturity is based on the timing the asset
is expected to be realised and the liability is expected to be settled.
29. Risk management -- Credit risk
In the ordinary course of its business the Group is exposed to credit
risk which is monitored through various control mechanisms across
all Group entities in order to prevent undue risk concentrations
and to price credit facilities and products on a risk--adjusted basis.
Credit risk is the risk that arises from the possible failure of
one or more customers to discharge their credit obligations towards
the Group.
The Credit Risk Management department in co--operation with the Credit
Risk Control and Monitoring department set the Group's credit disbursement
policies and monitor compliance with credit risk policies applicable
to each business line and the quality of the Group's loans and advances
portfolio through the timely credit risk assessment of customers.
The credit exposures of related accounts are aggregated and monitored
on a consolidated basis.
The Credit Risk Management department, in co--operation with the
Credit Risk Control and Monitoring department, also safeguard the
effective management of credit risk at all stages of the credit cycle,
monitor the quality of decisions and processes and ensure that the
credit sanctioning function is being properly managed.
The credit policies are combined with the methods used for the assessment
of the customers' creditworthiness (credit rating and credit scoring
systems).
The loan portfolio is analysed on the basis of assessments of the
customers' creditworthiness, their economic sector of activity and
geographical concentration.
The credit risk exposure of the Group is diversified across the various
sectors of the economy. Credit Risk Management determines the prohibitive/high
credit risk sectors of the economy and sets out stricter policy rules
for these sectors, according to their degree of riskiness.
The Market Risk department assesses the credit risk relating to exposures
to Credit Institutions and Governments and other debt securities.
Models and limits are presented to and approved by the Board of Directors,
through the relevant authority based on the authorisation level limits.
The Group's significant judgements, estimates and assumptions regarding
the determination of the level of provisions for impairment are described
in Note 6 'Significant and other judgements, estimates and assumptions'
of these Consolidated Financial Statements.
29.1 Maximum exposure to credit risk and collateral and other credit enhancements
Loans and advances to customers
The Credit Risk Management department determines the amount and type
of collateral and other credit enhancements required for the granting
of new loans to customers.
The main types of collateral obtained by the Group are mortgages
on real estate, cash collateral/blocked deposits, bank guarantees,
government guarantees, pledges of equity securities and debt instruments
of public companies, fixed and floating charges over corporate assets,
assignment of life insurance policies, assignment of rights on certain
contracts and personal and corporate guarantees.
The Group regularly monitors the changes in the market value of the
collateral and, where necessary, requests the pledging of additional
collateral in accordance with the relevant agreement.
Off--balance sheet exposures
The Group offers guarantee facilities to its customers under which
the Group may be required to make payments on their behalf and enters
into commitments to extend credit lines to secure their liquidity
needs.
Letters of credit and guarantee facilities (including standby letters
of credit) commit the Group to make payments on behalf of customers
in the event of a specific act, generally related to the import or
export of goods. Such commitments expose the Group to risks similar
to those of loans and advances and are therefore monitored by the
same policies and control processes.
Other financial instruments
Collateral held as security for financial assets other than loans
and advances to customers is determined by the nature of the financial
instrument. Debt securities and other eligible bills are generally
unsecured with the exception of asset--backed securities and similar
instruments, which are secured by pools of financial assets. In addition,
some debt securities are government--guaranteed.
The Group has chosen the ISDA Master Agreement for documenting its
derivatives activity. It provides the contractual framework within
which dealing activity across a full range of over--the--counter
(OTC) products is conducted and contractually binds both parties
to apply close--out netting across all outstanding transactions covered
by an agreement, if either party defaults. In most cases the parties
execute a Credit Support Annex (CSA) in conjunction with the ISDA
Master Agreement. Under a CSA, the collateral is passed between the
parties in order to mitigate the market contingent counterparty risk
inherent in their open positions. As at 30 June 2022, the majority
of derivative exposures are covered by ISDA netting arrangements.
A detailed analysis of derivative asset and liability exposures is
available in Note 14. Information about the Group's collaterals under
derivative transactions is provided in Note 27.
Settlement risk arises in any situation where a payment in cash or
securities is made in the expectation of a corresponding receipt
in securities or cash. The Group sets daily settlement limits for
each counterparty. Settlement risk is mitigated when transactions
are effected via established payment systems or on a delivery upon
payment basis.
The table below presents the maximum exposure to credit risk before
taking into account the tangible and measurable collateral and credit
enhancements held.
30 June 31 December
2022 2021
EUR000 EUR000
---------------- -----------------
Balances with central banks 9,767,741 9,087,968
---------------- -----------------
Loans and advances to banks (Note 27) 312,308 291,632
---------------- -----------------
FVPL debt and other non--equity securities (Note
13) 5,976 6,034
---------------- -----------------
Debt securities classified at amortised cost and
FVOCI 1,907,795 1,924,354
---------------- -----------------
Derivative financial instruments (Note 14) 38,150 6,653
---------------- -----------------
Loans and advances to customers (Note 16) 10,144,099 9,836,405
---------------- -----------------
Loans and advances to customers classified as held
for sale (Note 19) 247,207 250,370
---------------- -----------------
Debtors (Note 18) 49,333 36,540
---------------- -----------------
Reinsurers' share of insurance contract liabilities
(Note 18) 58,768 55,323
---------------- -----------------
Deferred purchase payment consideration (Note 18) 304,268 299,766
---------------- -----------------
Other assets (Note 18) 63,561 57,158
---------------- -----------------
On--balance sheet total 22,899,206 21,852,203
---------------- -----------------
Contingent liabilities
---------------- -----------------
Acceptances and endorsements 5,263 4,625
---------------- -----------------
Guarantees 584,748 609,830
---------------- -----------------
Commitments
---------------- -----------------
Documentary credits 11,288 11,264
---------------- -----------------
Undrawn formal stand--by facilities, credit lines
and other commitments to lend 1,900,867 1,950,665
---------------- -----------------
Off--balance sheet total 2,502,166 2,576,384
---------------- -----------------
25,401,372 24,428,587
---------------- -----------------
29.2 Credit risk concentration of loans and advances to customers
There are restrictions on loan concentrations which are imposed by
the Banking Law in Cyprus, the relevant CBC Directives and CRR. The
Group's risk appetite statement may impose stricter concentration
limits which are monitored by the Group.
The credit risk concentration, which is based on industry (economic
activity) and business line concentrations, as well as geographical
concentration, is presented below.
The geographical concentration, for credit risk concentration purposes,
is based on the Group's Country Risk Policy which is followed for
monitoring the Group's exposures. Market Risk is responsible for
analysing the country risk of exposures. ALCO reviews the country
risk of exposures on a quarterly basis and the Board, through its
Risk Committee, reviews the country risk of exposures and any breaches
of country risk limits on a regular basis and at least annually.
The table below presents the geographical concentration of loans
and advances to customers by country of risk based on the country
of residency for individuals and the country of registration for
companies. Loans and advances to customers are presented separately
for countries with high concentration and all other countries with
low concentration are presented within 'Other countries' as per Group
policy.
Cyprus Greece United Romania Russia Other Gross loans
Kingdom countries at amortised
30 June 2022 cost
By economic
activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Trade 970,006 432 71 2 - 67 970,578
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Manufacturing 321,223 45,085 - - - 39,698 406,006
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Hotels and
catering 938,500 32,481 36,461 - - 40,107 1,047,549
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Construction 560,237 9,083 80 1,985 - 40 571,425
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Real estate 903,732 95,373 1,901 11,064 - 48,242 1,060,312
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Private
individuals 4,471,587 9,053 89,316 1,191 26,735 67,973 4,665,855
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Professional
and
other
services 643,738 1,001 5,381 879 356 40,937 692,292
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Other sectors 435,969 5 34 - 2 218,339 654,349
------------- -------------- ------------- -------------- -------------- ------------- ---------------
9,244,992 192,513 133,244 15,121 27,093 455,403 10,068,366
------------- -------------- ------------- -------------- -------------- ------------- ---------------
Cyprus Greece United Romania Russia Other Gross loans
Kingdom countries at amortised
30 June 2022 cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Corporate 2,156,913 9,471 54 - 350 117 2,166,905
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Large and
international
corporate 1,439,771 173,810 43,175 11,780 - 376,620 2,045,156
------------- -------------- -------------- -------------- ------------- ------------- ----------------
SMEs 1,033,533 710 2,318 2,023 - 2,250 1,040,834
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Retail
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- housing 3,191,534 3,585 41,008 857 3,581 27,315 3,267,880
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- consumer,
credit
cards and
other 908,645 1,036 747 131 207 2,709 913,475
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Restructuring
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- corporate 47,871 - 526 - 32 61 48,490
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- SMEs 61,076 - 168 - 163 454 61,861
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- retail
housing 79,995 152 1,897 - 416 767 83,227
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- retail
other 24,755 4 33 1 - 41 24,834
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Recoveries
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- corporate 23,084 - 4 61 141 181 23,471
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- SMEs 27,795 - 1,672 59 2,192 1,938 33,656
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- retail
housing 90,418 251 25,694 76 5,544 11,719 133,702
------------- -------------- -------------- -------------- ------------- ------------- ----------------
-- retail
other 45,163 27 2,175 4 210 626 48,205
------------- -------------- -------------- -------------- ------------- ------------- ----------------
International
banking
services 82,605 2,085 13,773 129 14,257 24,350 137,199
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Wealth
management 31,834 1,382 - - - 6,255 39,471
------------- -------------- -------------- -------------- ------------- ------------- ----------------
9,244,992 192,513 133,244 15,121 27,093 455,403 10,068,366
------------- -------------- -------------- -------------- ------------- ------------- ----------------
Cyprus Greece United Romania Russia Other Gross loans
31 December Kingdom countries at amortised
2021 cost
By economic
activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Trade 977,703 505 122 60 3,351 146 981,887
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Manufacturing 303,372 179 - - 1,212 25,674 330,437
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Hotels and
catering 881,205 33,422 37,450 - - 40,123 992,200
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Construction 510,928 9,005 108 2,108 646 58 522,853
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Real estate 959,891 125,123 1,950 11,443 - 49,293 1,147,700
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Private
individuals 4,379,843 9,185 121,260 1,057 37,315 73,997 4,622,657
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Professional
and
other
services 543,424 1,007 5,516 875 16,492 35,142 602,456
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Other sectors 458,005 7 40 - 8 182,285 640,345
------------- -------------- ------------- ------------- -------------- ------------- ---------------
9,014,371 178,433 166,446 15,543 59,024 406,718 9,840,535
------------- -------------- ------------- ------------- -------------- ------------- ---------------
Cyprus Greece United Romania Russia Other Gross loans
31 December Kingdom countries at amortised
2021 cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Corporate 2,018,926 9,430 60 99 15,778 113 2,044,406
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Large and
international
corporate 1,417,643 159,349 44,132 11,742 - 320,730 1,953,596
------------- ------------- ------------- -------------- -------------- ------------ ----------------
SMEs 1,038,599 773 1,869 2,047 4,701 2,345 1,050,334
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Retail
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- housing 3,068,097 3,466 47,742 629 4,513 26,819 3,151,266
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- consumer,
credit
cards and
other 884,231 1,101 760 126 237 2,232 888,687
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Restructuring
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- corporate 60,446 - 526 - 32 1,213 62,217
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- SMEs 69,501 - 338 - - 340 70,179
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- retail
housing 80,730 152 3,058 - 392 752 85,084
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- retail
other 32,611 14 132 - 3 238 32,998
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Recoveries
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- corporate 35,010 - - 589 219 256 36,074
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- SMEs 30,505 - 2,557 2 3,699 2,554 39,317
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- retail
housing 109,945 382 45,158 167 9,254 18,213 183,119
------------- ------------- ------------- -------------- -------------- ------------ ----------------
-- retail
other 54,959 30 4,356 4 1,557 1,304 62,210
------------- ------------- ------------- -------------- -------------- ------------ ----------------
International
banking
services 76,314 2,402 15,211 138 18,639 23,214 135,918
------------- ------------- ------------- -------------- -------------- ------------ ----------------
Wealth
management 36,854 1,334 547 - - 6,395 45,130
------------- ------------- ------------- -------------- -------------- ------------ ----------------
9,014,371 178,433 166,446 15,543 59,024 406,718 9,840,535
------------- ------------- ------------- -------------- -------------- ------------ ----------------
The loans and advances to customers include lending exposures in Cyprus
with collaterals in Greece with a carrying value as at 30 June 2022
of EUR102,150 thousand (31 December 2021: EUR100,039 thousand).
The loan and advances to customers reported within 'Other countries'
as at 30 June 2022 include exposures of EUR3,2 million in Ukraine
(31 December 2021: EUR3,6 million).
29.3 Credit risk concentration of loans and advances to customers classified as held for sale
Economic activity, geographical and business line concentrations
of Group loans and advances to customers at amortised cost classified
as held for sale are presented in the table below.
Cyprus United Romania Russia Other Gross loans
Kingdom countries at amortised
30 June 2022 cost
By economic
activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- -------------- -------------- ------------- -------------------
Trade 56,677 - 533 1 - 57,211
-------------- -------------- -------------- -------------- ------------- -------------------
Manufacturing 24,121 1 119 - - 24,241
-------------- -------------- -------------- -------------- ------------- -------------------
Hotels and
catering 14,995 6 276 - - 15,277
-------------- -------------- -------------- -------------- ------------- -------------------
Construction 27,447 - 253 - - 27,700
-------------- -------------- -------------- -------------- ------------- -------------------
Real estate 6,122 - 9,635 - - 15,757
-------------- -------------- -------------- -------------- ------------- -------------------
Private
individuals 366,929 1,092 55 839 4,501 373,416
-------------- -------------- -------------- -------------- ------------- -------------------
Professional and
other
services 26,087 2 1,258 - - 27,347
-------------- -------------- -------------- -------------- ------------- -------------------
Other sectors 10,856 - 1 - - 10,857
-------------- -------------- -------------- -------------- ------------- -------------------
533,234 1,101 12,130 840 4,501 551,806
-------------- -------------- -------------- -------------- ------------- -------------------
Cyprus United Romania Russia Other Gross loans
Kingdom countries at amortised
30 June 2022 cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------- -------------- ------------- -------------- -------------- ---------------------
Large and
International
corporate - - 10,507 - - 10,507
--------------- -------------- ------------- -------------- -------------- ---------------------
SMEs - - 247 - - 247
--------------- -------------- ------------- -------------- -------------- ---------------------
Restructuring
--------------- -------------- ------------- -------------- -------------- ---------------------
-- corporate 366 - - - - 366
--------------- -------------- ------------- -------------- -------------- ---------------------
-- SMEs 3,979 - - - - 3,979
--------------- -------------- ------------- -------------- -------------- ---------------------
-- retail
housing 18,253 492 - - 34 18,779
--------------- -------------- ------------- -------------- -------------- ---------------------
-- retail other 6,270 - - - - 6,270
--------------- -------------- ------------- -------------- -------------- ---------------------
Recoveries
--------------- -------------- ------------- -------------- -------------- ---------------------
-- corporate 8,309 - 1,058 - 1 9,368
--------------- -------------- ------------- -------------- -------------- ---------------------
-- SMEs 14,780 1 318 800 394 16,293
--------------- -------------- ------------- -------------- -------------- ---------------------
-- retail
housing 243,857 594 - 39 3,532 248,022
--------------- -------------- ------------- -------------- -------------- ---------------------
-- retail other 237,420 14 - 1 540 237,975
--------------- -------------- ------------- -------------- -------------- ---------------------
533,234 1,101 12,130 840 4,501 551,806
--------------- -------------- ------------- -------------- -------------- ---------------------
Cyprus United Romania Russia Other Gross loans
Kingdom countries at amortised
31 December 2021 cost
By economic activity EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
-------------- -------------- ------------- ------------- ------------- -------------------
Trade 56,859 - 514 - - 57,373
-------------- -------------- ------------- ------------- ------------- -------------------
Manufacturing 24,688 1 110 - - 24,799
-------------- -------------- ------------- ------------- ------------- -------------------
Hotels and catering 14,794 1 278 - - 15,073
-------------- -------------- ------------- ------------- ------------- -------------------
Construction 28,226 - 231 - - 28,457
-------------- -------------- ------------- ------------- ------------- -------------------
Real estate 4,575 - 9,395 - - 13,970
-------------- -------------- ------------- ------------- ------------- -------------------
Private individuals 369,182 1,070 55 804 4,087 375,198
-------------- -------------- ------------- ------------- ------------- -------------------
Professional and
other
services 27,866 2 1,466 - - 29,334
-------------- -------------- ------------- ------------- ------------- -------------------
Other sectors 11,476 - 77 - 32 11,585
-------------- -------------- ------------- ------------- ------------- -------------------
537,666 1,074 12,126 804 4,119 555,789
-------------- -------------- ------------- ------------- ------------- -------------------
Cyprus United Romania Russia Other Gross loans
31 December Kingdom countries at amortised
2021 cost
By business
line EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
---------------- -------------- ------------- ------------- ------------- -----------------------
Large and
International
Corporate - - 10,441 - 32 10,473
---------------- -------------- ------------- ------------- ------------- -----------------------
SMEs - - 231 - - 231
---------------- -------------- ------------- ------------- ------------- -----------------------
Retail
---------------- -------------- ------------- ------------- ------------- -----------------------
-- housing 153 - - - - 153
---------------- -------------- ------------- ------------- ------------- -----------------------
-- consumer,
credit cards
and other 2 - - - - 2
---------------- -------------- ------------- ------------- ------------- -----------------------
Restructuring
---------------- -------------- ------------- ------------- ------------- -----------------------
-- corporate 374 - - - - 374
---------------- -------------- ------------- ------------- ------------- -----------------------
-- SMEs 5,301 - - - - 5,301
---------------- -------------- ------------- ------------- ------------- -----------------------
-- retail
housing 23,769 501 - - 34 24,304
---------------- -------------- ------------- ------------- ------------- -----------------------
-- retail
other 12,702 - - - - 12,702
---------------- -------------- ------------- ------------- ------------- -----------------------
Recoveries
---------------- -------------- ------------- ------------- ------------- -----------------------
-- corporate 8,090 - 1,111 - - 9,201
---------------- -------------- ------------- ------------- ------------- -----------------------
-- SMEs 17,923 1 343 766 381 19,414
---------------- -------------- ------------- ------------- ------------- -----------------------
-- retail
housing 238,791 566 - 38 3,210 242,605
---------------- -------------- ------------- ------------- ------------- -----------------------
-- retail
other 230,561 6 - - 462 231,029
---------------- -------------- ------------- ------------- ------------- -----------------------
537,666 1,074 12,126 804 4,119 555,789
---------------- -------------- ------------- ------------- ------------- -----------------------
29.4 Analysis of loans and advances to customers by staging
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000
------------------ ------------------- ------------------ ------------------- -----------------
Gross loans at
amortised
cost before
residual
fair value
adjustment
on initial
recognition 7,758,616 1,821,428 460,216 124,176 10,164,436
------------------ ------------------- ------------------ ------------------- -----------------
Residual fair
value
adjustment on
initial
recognition (67,369) (21,515) (3,905) (3,281) (96,070)
------------------ ------------------- ------------------ ------------------- -----------------
Gross loans at
amortised
cost 7,691,247 1,799,913 456,311 120,895 10,068,366
------------------ ------------------- ------------------ ------------------- -----------------
Cyprus 7,691,008 1,799,913 454,177 120,895 10,065,993
------------------ ------------------- ------------------ ------------------- -----------------
Other Countries 239 - 2,134 - 2,373
------------------ ------------------- ------------------ ------------------- -----------------
7,691,247 1,799,913 456,311 120,895 10,068,366
------------------ ------------------- ------------------ ------------------- -----------------
Stage 1 Stage 2 Stage 3 POCI Total
31 December 2021 EUR000 EUR000 EUR000 EUR000 EUR000
------------------ ------------------- ------------------ ------------------- ----------------
Gross loans at
amortised
cost before
residual
fair value
adjustment
on initial
recognition 7,488,354 1,721,231 576,873 159,755 9,946,213
------------------ ------------------- ------------------ ------------------- ----------------
Residual fair
value
adjustment on
initial
recognition (69,659) (22,051) (3,530) (10,438) (105,678)
------------------ ------------------- ------------------ ------------------- ----------------
Gross loans at
amortised
cost 7,418,695 1,699,180 573,343 149,317 9,840,535
------------------ ------------------- ------------------ ------------------- ----------------
Cyprus 7,418,432 1,699,180 545,327 149,317 9,812,256
------------------ ------------------- ------------------ ------------------- ----------------
Other countries 263 - 28,016 - 28,279
------------------ ------------------- ------------------ ------------------- ----------------
7,418,695 1,699,180 573,343 149,317 9,840,535
------------------ ------------------- ------------------ ------------------- ----------------
Loans and advances to customers classified as held for sale
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- ------------------ ------------------ ---------------
Gross loans at
amortised
cost before
residual
fair value
adjustment
on initial
recognition 94 1,754 472,474 95,527 569,849
-------------------- -------------------- ------------------ ------------------ ---------------
Residual fair
value
adjustment on
initial
recognition - (40) (1,683) (16,320) (18,043)
-------------------- -------------------- ------------------ ------------------ ---------------
Gross loans at
amortised
cost 94 1,714 470,791 79,207 551,806
-------------------- -------------------- ------------------ ------------------ ---------------
Stage 1 Stage 2 Stage 3 POCI Total
31 December 2021 EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- ------------------ ------------------ ---------------
Gross loans at
amortised
cost before
residual
fair value
adjustment
on initial
recognition - 2,132 476,538 96,209 574,879
-------------------- -------------------- ------------------ ------------------ ---------------
Residual fair
value
adjustment on
initial
recognition - (57) (2,079) (16,954) (19,090)
-------------------- -------------------- ------------------ ------------------ ---------------
Gross loans at
amortised
cost - 2,075 474,459 79,255 555,789
-------------------- -------------------- ------------------ ------------------ ---------------
Residual fair value adjustment
The residual fair value adjustment mainly relates to the loans and
advances to customers acquired as part of the acquisition of certain
operations of Laiki Bank in 2013. In accordance with the provisions
of IFRS 3, this adjustment decreased the gross balance of loans and
advances to customers. The residual fair value adjustment is included
within the gross balances of loans and advances to customers as at
each balance sheet date. However, for credit risk monitoring, the
residual fair value adjustment as at each balance sheet date is presented
separately from the gross balances of loans and advances, as shown
in the tables above.
The following tables present the Group's gross loans and advances
to customers at amortised cost by staging and by business line concentration.
30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- -------------------- -------------------- ----------------
Corporate 1,709,712 421,888 16,962 18,343 2,166,905
-------------------- -------------------- -------------------- -------------------- ----------------
Large and
International
corporate 1,466,397 499,664 56,220 22,875 2,045,156
-------------------- -------------------- -------------------- -------------------- ----------------
SMEs 782,914 242,613 4,622 10,685 1,040,834
-------------------- -------------------- -------------------- -------------------- ----------------
Retail
-------------------- -------------------- -------------------- -------------------- ----------------
-- housing 2,872,402 345,464 38,045 11,969 3,267,880
-------------------- -------------------- -------------------- -------------------- ----------------
-- consumer,
credit
cards and
other 707,746 169,818 19,957 15,954 913,475
-------------------- -------------------- -------------------- -------------------- ----------------
Restructuring
-------------------- -------------------- -------------------- -------------------- ----------------
-- corporate 6,373 33,331 8,743 43 48,490
-------------------- -------------------- -------------------- -------------------- ----------------
-- SMEs 12,510 17,222 28,884 3,245 61,861
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
housing 3,854 20,918 54,630 3,825 83,227
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
other 1,581 4,340 17,898 1,015 24,834
-------------------- -------------------- -------------------- -------------------- ----------------
Recoveries
-------------------- -------------------- -------------------- -------------------- ----------------
-- corporate - - 19,706 3,765 23,471
-------------------- -------------------- -------------------- -------------------- ----------------
-- SMEs - - 30,062 3,594 33,656
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
housing - - 116,070 17,632 133,702
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
other 42 - 40,721 7,442 48,205
-------------------- -------------------- -------------------- -------------------- ----------------
International
banking
services 92,001 41,277 3,778 143 137,199
-------------------- -------------------- -------------------- -------------------- ----------------
Wealth
management 35,715 3,378 13 365 39,471
-------------------- -------------------- -------------------- -------------------- ----------------
7,691,247 1,799,913 456,311 120,895 10,068,366
-------------------- -------------------- -------------------- -------------------- ----------------
31 December Stage 1 Stage 2 Stage 3 POCI Total
2021
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- -------------------- -------------------- ----------------
Corporate 1,569,699 430,865 22,357 21,485 2,044,406
-------------------- -------------------- -------------------- -------------------- ----------------
Large and
International
corporate 1,374,550 501,092 55,159 22,795 1,953,596
-------------------- -------------------- -------------------- -------------------- ----------------
SMEs 812,211 215,012 12,522 10,589 1,050,334
-------------------- -------------------- -------------------- -------------------- ----------------
Retail
-------------------- -------------------- -------------------- -------------------- ----------------
-- housing 2,769,274 320,473 49,633 11,886 3,151,266
-------------------- -------------------- -------------------- -------------------- ----------------
-- consumer,
credit
cards and
other 732,154 116,983 23,361 16,189 888,687
-------------------- -------------------- -------------------- -------------------- ----------------
Restructuring
-------------------- -------------------- -------------------- -------------------- ----------------
-- corporate 6,092 35,613 14,255 6,257 62,217
-------------------- -------------------- -------------------- -------------------- ----------------
-- SMEs 14,016 16,417 34,083 5,663 70,179
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
housing 3,075 15,528 62,934 3,547 85,084
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
other 1,409 5,701 24,838 1,050 32,998
-------------------- -------------------- -------------------- -------------------- ----------------
Recoveries
-------------------- -------------------- -------------------- -------------------- ----------------
-- corporate - - 29,600 6,474 36,074
-------------------- -------------------- -------------------- -------------------- ----------------
-- SMEs - - 35,685 3,632 39,317
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
housing - - 154,469 28,650 183,119
-------------------- -------------------- -------------------- -------------------- ----------------
-- retail
other 114 - 51,672 10,424 62,210
-------------------- -------------------- -------------------- -------------------- ----------------
International
banking
services 92,193 40,715 2,775 235 135,918
-------------------- -------------------- -------------------- -------------------- ----------------
Wealth
management 43,908 781 - 441 45,130
-------------------- -------------------- -------------------- -------------------- ----------------
7,418,695 1,699,180 573,343 149,317 9,840,535
-------------------- -------------------- -------------------- -------------------- ----------------
Loans and advances to customers classified as held for sale
The following table presents the Group's gross loans and advances
to customers at amortised cost classified as held for sale as at
30 June 2022 and 31 December 2021, by staging and business line concentration.
30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- -------------------- -------------------- ------------------
Large and
International
corporate - - 10,507 - 10,507
-------------------- -------------------- -------------------- -------------------- ------------------
SMEs - - 247 - 247
-------------------- -------------------- -------------------- -------------------- ------------------
Restructuring
-------------------- -------------------- -------------------- -------------------- ------------------
-- corporate - - 366 - 366
-------------------- -------------------- -------------------- -------------------- ------------------
-- SMEs - 860 2,441 678 3,979
-------------------- -------------------- -------------------- -------------------- ------------------
-- retail
housing 94 694 17,056 935 18,779
-------------------- -------------------- -------------------- -------------------- ------------------
-- retail
other - 160 5,537 573 6,270
-------------------- -------------------- -------------------- -------------------- ------------------
Recoveries
-------------------- -------------------- -------------------- -------------------- ------------------
-- corporate - - 8,640 728 9,368
-------------------- -------------------- -------------------- -------------------- ------------------
-- SMEs - - 14,802 1,491 16,293
-------------------- -------------------- -------------------- -------------------- ------------------
-- retail
housing - - 208,669 39,353 248,022
-------------------- -------------------- -------------------- -------------------- ------------------
-- retail
other - - 202,526 35,449 237,975
-------------------- -------------------- -------------------- -------------------- ------------------
94 1,714 470,791 79,207 551,806
-------------------- -------------------- -------------------- -------------------- ------------------
31 December Stage 1 Stage 2 Stage 3 POCI Total
2021
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- -------------------- --------------------- --------------------- --------------------
Large and
International
corporate - - 10,470 3 10,473
-------------------- -------------------- --------------------- --------------------- --------------------
SMEs - - 231 - 231
-------------------- -------------------- --------------------- --------------------- --------------------
Retail
-------------------- -------------------- --------------------- --------------------- --------------------
-- housing - - 153 - 153
-------------------- -------------------- --------------------- --------------------- --------------------
-- consumer,
credit
cards and
other - - 2 - 2
-------------------- -------------------- --------------------- --------------------- --------------------
Restructuring
-------------------- -------------------- --------------------- --------------------- --------------------
-- corporate - - 374 - 374
-------------------- -------------------- --------------------- --------------------- --------------------
-- SMEs - 718 3,842 741 5,301
-------------------- -------------------- --------------------- --------------------- --------------------
-- retail
housing - 804 22,113 1,387 24,304
-------------------- -------------------- --------------------- --------------------- --------------------
-- retail
other - 553 11,543 606 12,702
-------------------- -------------------- --------------------- --------------------- --------------------
Recoveries
-------------------- -------------------- --------------------- --------------------- --------------------
-- corporate - - 8,507 694 9,201
-------------------- -------------------- --------------------- --------------------- --------------------
-- SMEs - - 17,653 1,761 19,414
-------------------- -------------------- --------------------- --------------------- --------------------
-- retail
housing - - 204,956 37,649 242,605
-------------------- -------------------- --------------------- --------------------- --------------------
-- retail
other - - 194,615 36,414 231,029
-------------------- -------------------- --------------------- --------------------- --------------------
- 2,075 474,459 79,255 555,789
-------------------- -------------------- --------------------- --------------------- --------------------
The movement of the gross loans and advances to customers at amortised
cost by staging, including the loans and advances to customers classified
as held for sale, is presented in the tables below:
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- ------------------- -------------------
1 January 7,418,695 1,701,255 1,047,802 228,572 10,396,324
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
1 292,741 (292,741) - - -
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
2 (405,422) 429,065 (23,643) - -
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
3 (4,782) (19,409) 24,191 - -
------------------- ------------------- ------------------- ------------------- -------------------
Foreign
exchange and
other
adjustments (24) - 905 - 881
------------------- ------------------- ------------------- ------------------- -------------------
Write offs (398) (295) (100,301) (17,522) (118,516)
------------------- ------------------- ------------------- ------------------- -------------------
Interest
accrued and
other
adjustments 94,167 38,719 37,154 13,327 183,367
------------------- ------------------- ------------------- ------------------- -------------------
New loans
originated
or purchased
and drawdowns
of existing
facilities 1,060,453 46,984 200 852 1,108,489
------------------- ------------------- ------------------- ------------------- -------------------
Loans
derecognised
or repaid
(excluding
write offs) (763,291) (103,101) (56,132) (25,008) (947,532)
------------------- ------------------- ------------------- ------------------- -------------------
Changes to
contractual
cash flows
due to
modifications (798) 1,150 (3,074) (119) (2,841)
------------------- ------------------- ------------------- ------------------- -------------------
30 June 7,691,341 1,801,627 927,102 200,102 10,620,172
------------------- ------------------- ------------------- ------------------- -------------------
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2021 EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- ------------------- -------------------- -------------------- -------------------
1 January 6,615,026 2,145,329 2,502,487 479,016 11,741,858
-------------------- ------------------- -------------------- -------------------- -------------------
Transfers to
stage
1 811,784 (811,782) (2) - -
-------------------- ------------------- -------------------- -------------------- -------------------
Transfers to
stage
2 (560,426) 602,381 (41,955) - -
-------------------- ------------------- -------------------- -------------------- -------------------
Transfers to
stage
3 (10,274) (24,050) 34,324 - -
-------------------- ------------------- -------------------- -------------------- -------------------
Foreign
exchange and
other
adjustments 7 - 1,452 (3) 1,456
-------------------- ------------------- -------------------- -------------------- -------------------
Write offs (255) (782) (117,481) (19,479) (137,997)
-------------------- ------------------- -------------------- -------------------- -------------------
Interest
accrued and
other
adjustments 23,844 102,978 54,582 10,951 192,355
-------------------- ------------------- -------------------- -------------------- -------------------
New loans
originated
or purchased
and drawdowns
of existing
facilities 769,064 12,736 6,107 11,889 799,796
-------------------- ------------------- -------------------- -------------------- -------------------
Loans other
than Helix
2 portfolio
derecognised
or repaid
(excluding
write offs) (644,376) (103,090) (102,577) (40,316) (890,359)
-------------------- ------------------- -------------------- -------------------- -------------------
Changes to
contractual
cash flows
due to
modifications 3,465 (4,539) (3,002) 28 (4,048)
-------------------- ------------------- -------------------- -------------------- -------------------
Derecognition
of Helix
2 portfolio (8,408) (16,941) (1,087,782) (173,714) (1,286,845)
-------------------- ------------------- -------------------- -------------------- -------------------
30 June 6,999,451 1,902,240 1,246,153 268,372 10,416,216
-------------------- ------------------- -------------------- -------------------- -------------------
For revolving facilities, overdrafts and credit cards the net positive
change in balance by stage excluding write--offs is reported in 'New
loans originated' and the net negative change is reported in 'Loans
derecognised or repaid'.
Significant increase in credit risk (SICR)
IFRS 9 requires that in the event of a significant increase in credit
risk since initial recognition, the calculation basis of the loss
allowance would change from 12 month ECLs to lifetime ECLs.
The assessment of whether credit risk has increased significantly
since initial recognition is performed at each reporting date, by
considering the change in the risk of default occurring over the
remaining life of the financial instrument since initial recognition.
Significant increase in credit risk for loans and advances to customers
Primarily, the Group uses the lifetime probability of default (PDs)
as the quantitative metric in order to assess transition from Stage
1 to Stage 2 for all portfolios. The Group considers an exposure
to have experienced significant increase in credit risk (SICR) by
comparing the PD at the reporting date with the PD at initial recognition
to compute the relative increase in regard to the corresponding threshold.
The threshold has been determined by using statistical analysis on
historical information of credit migration exposures on the basis
of days past due, for the different segments. The Group applies the
thresholds presented in the table below to each portfolio/segment,
based on the following characteristics: customer type, product type
and rating at origination. The threshold is then assigned to each
facility according to the facility's portfolio/segment.
For Retail, SME and Corporate portfolios, the threshold applied varies
depending on the original credit quality of the borrower. For specific
segments, instruments with lower default probabilities at inception
due to good credit quality of the counterparty, the SICR threshold
is set as probability at inception times a multiple which is higher
than a multiple used for instruments with higher default probabilities
at inception.
The SICR trigger is activated based on the comparison of the ratio
of current lifetime PD to the remaining Lifetime PD at origination
(PD@O) to the pre--established threshold. If the resulting ratio
is higher than the pre--established threshold then deterioration
is assumed to have occurred and the exposure is transferred to Stage
2. The thresholds calibration is driven by changes in the PD models
which are assessed semi--annually.
The table below summarises the quantitative measure of the SICR trigger
which varies depending on the credit quality at origination as follows,
applied on 30 June 2022 and 31 December 2021:
Segment Rating at PD Deterioration PD Deterioration
origination thresholds applied thresholds applied
at at
30 June 2022 31 December 2021
1--3 2 X PD@O 2 X PD@O
Retail 4--5 2 X PD@O 2 X PD@O
6--7 2 X PD@O 2 X PD@O
----------------------- ---------------------------- ------------------------------
1--3 2 X PD@O 2 X PD@O
SME 4--5 2 X PD@O 2 X PD@O
6--7 2 X PD@O 2 X PD@O
----------------------- ---------------------------- ------------------------------
Corporate 1--7 1--3 X PD@O 1--3 X PD@O
----------------------- ---------------------------- ------------------------------
For exposures which are subject to individual impairment assessment,
the following qualitative factors in addition to the ones incorporated
in the PD calculation, are considered:
* significant change in collateral value or guarantee
or financial support provided by
shareholders/directors,
* significant adverse changes in business, financial
and/or economic conditions in which the borrower
operates.
In addition, SICR is automatically triggered upon the granting of
forbearance measures to performing borrowers. Stage 1 exposures that
are classified as 'performing forborne' are automatically transferred
to Stage 2.
The Group also considers, as a backstop criterion, that a significant
increase in the credit risk occurs when contractual payments are
more than 30 days past due (past due materiality is applied). Loans
that meet this condition are classified in Stage 2. The transfer
to Stage 2 does not take place in cases where certain exposures are
past due for more than 30 days but certain materiality limits are
not met (such as arrears up to EUR100 and funded balances up to 1%
in the case of retail exposures and arrears up to EUR500 and funded
balances up to 1% on all exposures other than retail). The materiality
levels are set in accordance with the ECB Regulation (EU) 2018/1845.
The thresholds for movement between Stage 1 and Stage 2 are symmetrical.
After a financial asset has been transferred to Stage 2, if its credit
risk is no longer considered to have significantly increased relative
to its initial recognition, the financial asset will move back to
Stage 1.
29.5 Credit losses of loans and advances to customers, including
loans and advances to customers held for sale
The movement in ECL of loans and advances to customers, including
the loans and advances to customers held for sale, is as follows:
30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total
EUR000 EUR000 EUR000 EUR000 EUR000
------------------- -------------------- ------------------- ------------------- -------------------
1 January 15,457 29,383 478,796 67,781 591,417
------------------- -------------------- ------------------- ------------------- -------------------
Transfers to
stage
1 4,837 (4,837) - - -
------------------- -------------------- ------------------- ------------------- -------------------
Transfers to
stage
2 (1,355) 5,604 (4,249) - -
------------------- -------------------- ------------------- ------------------- -------------------
Transfers to
stage
3 (34) (591) 625 - -
------------------- -------------------- ------------------- ------------------- -------------------
Impact on
transfer
between stages
during
the period* (4,177) 2 5,205 (41) 989
------------------- -------------------- ------------------- ------------------- -------------------
Foreign
exchange and
other
adjustments - - 1,406 - 1,406
------------------- -------------------- ------------------- ------------------- -------------------
Write offs (398) (295) (100,781) (17,522) (118,996)
------------------- -------------------- ------------------- ------------------- -------------------
Interest
(provided)
not recognised
in
the income
statement - - 7,697 1,471 9,168
------------------- -------------------- ------------------- ------------------- -------------------
New loans
originated
or purchased* 1,985 - - 27 2,012
------------------- -------------------- ------------------- ------------------- -------------------
Loans
derecognised
or repaid
(excluding
write offs)* (254) (830) (7,779) (1,490) (10,353)
------------------- -------------------- ------------------- ------------------- -------------------
Write offs* 380 196 6,565 734 7,875
------------------- -------------------- ------------------- ------------------- -------------------
Changes to
models
and inputs
(changes
in PDs, LGDs
and EADs)
used for ECL
calculations* 625 (3,302) 28,536 4,162 30,021
------------------- -------------------- ------------------- ------------------- -------------------
Changes to
contractual
cash flows due
to
modifications
not
resulting in
derecognition* (158) 1,685 (3,755) (261) (2,489)
------------------- -------------------- ------------------- ------------------- -------------------
30 June 2022 16,908 27,015 412,266 54,861 511,050
------------------- -------------------- ------------------- ------------------- -------------------
Individually
assessed 6,380 12,327 63,636 4,530 86,873
------------------- -------------------- ------------------- ------------------- -------------------
Collectively
assessed 10,528 14,688 348,630 50,331 424,177
------------------- -------------------- ------------------- ------------------- -------------------
16,908 27,015 412,266 54,861 511,050
------------------- -------------------- ------------------- ------------------- -------------------
* Individual components of the 'Impairment loss net of reversals on
loans and advances to customers' (Note 10).
The impairment loss for the six months ended 30 June 2022 was driven
mainly from additional net credit losses recorded on NPEs as part
of the Group's de--risking activities and additional ECL charge of
EUR9 million following the changes in the methodology for the cure
models and the new overlays introduced in 2022, as explained in Note
6.2.
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2021 EUR000 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- ------------------- -------------------
1 January 22,619 49,127 1,376,412 204,477 1,652,635
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
1 11,504 (11,504) - - -
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
2 (3,543) 9,116 (5,573) - -
------------------- ------------------- ------------------- ------------------- -------------------
Transfers to
stage
3 (437) (197) 634 - -
------------------- ------------------- ------------------- ------------------- -------------------
Impact on
transfer
between stages
during
the period* (10,536) 1,291 2,328 (264) (7,181)
------------------- ------------------- ------------------- ------------------- -------------------
Foreign
exchange and
other
adjustments 165 - 1,193 (44) 1,314
------------------- ------------------- ------------------- ------------------- -------------------
Write offs (255) (782) (117,482) (19,479) (137,998)
------------------- ------------------- ------------------- ------------------- -------------------
Interest
(provided)
not recognised
in
the income
statement - - 30,896 4,322 35,218
------------------- ------------------- ------------------- ------------------- -------------------
New loans
originated
or purchased* 4,606 - - - 4,606
------------------- ------------------- ------------------- ------------------- -------------------
Loans other
than Helix
2 portfolio
derecognised
or repaid
(excluding
write offs)* (246) (436) (12,673) 397 (12,958)
------------------- ------------------- ------------------- ------------------- -------------------
Write offs* 242 350 (4,331) 579 (3,160)
------------------- ------------------- ------------------- ------------------- -------------------
Changes to
models
and inputs
(changes
in PDs, LGDs
and EADs)
used for ECL
calculations* (3,306) (4,450) 65,757 9,120 67,121
------------------- ------------------- ------------------- ------------------- -------------------
Changes to
contractual
cash flows due
to
modifications
not
resulting in
derecognition* (654) 1,020 (5,044) (2,033) (6,711)
------------------- ------------------- ------------------- ------------------- -------------------
Disposal of
Helix
2 portfolio (3,197) (12,802) (725,525) (109,569) (851,093)
------------------- ------------------- ------------------- ------------------- -------------------
30 June 2021 16,962 30,733 606,592 87,506 741,793
------------------- ------------------- ------------------- ------------------- -------------------
Individually
assessed 5,748 11,858 86,297 7,869 111,772
------------------- ------------------- ------------------- ------------------- -------------------
Collectively
assessed 11,214 18,875 520,295 79,637 630,021
------------------- ------------------- ------------------- ------------------- -------------------
16,962 30,733 606,592 87,506 741,793
------------------- ------------------- ------------------- ------------------- -------------------
The analysis of credit losses of loans and advances to customers,
including the loans and advances to customers held for sale, by business
line is presented in the table below:
Stage 1 Stage 2 Stage 3 POCI Total
30 June 2022 EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- --------------------- --------------------- --------------------- -------------------
Corporate 6,441 4,445 5,878 965 17,729
-------------------- --------------------- --------------------- --------------------- -------------------
Large and
International
corporate 4,554 7,509 33,334 973 46,370
-------------------- --------------------- --------------------- --------------------- -------------------
SMEs 1,550 3,217 2,235 178 7,180
-------------------- --------------------- --------------------- --------------------- -------------------
Retail
-------------------- --------------------- --------------------- --------------------- -------------------
-- housing 1,775 2,096 5,833 281 9,985
-------------------- --------------------- --------------------- --------------------- -------------------
-- consumer,
credit
cards and
other 2,295 4,907 7,671 1,087 15,960
-------------------- --------------------- --------------------- --------------------- -------------------
Restructuring
-------------------- --------------------- --------------------- --------------------- -------------------
-- corporate 41 2,135 1,849 24 4,049
-------------------- --------------------- --------------------- --------------------- -------------------
-- SMEs 102 1,132 13,743 872 15,849
-------------------- --------------------- --------------------- --------------------- -------------------
-- retail
housing 46 719 15,735 809 17,309
-------------------- --------------------- --------------------- --------------------- -------------------
-- retail
other 29 603 10,116 816 11,564
-------------------- --------------------- --------------------- --------------------- -------------------
Recoveries
-------------------- --------------------- --------------------- --------------------- -------------------
-- corporate - - 17,650 2,460 20,110
-------------------- --------------------- --------------------- --------------------- -------------------
-- SMEs - - 22,153 1,308 23,461
-------------------- --------------------- --------------------- --------------------- -------------------
-- retail
housing - - 125,168 21,652 146,820
-------------------- --------------------- --------------------- --------------------- -------------------
-- retail
other - - 150,114 23,431 173,545
-------------------- --------------------- --------------------- --------------------- -------------------
International
banking
services 44 248 783 4 1,079
-------------------- --------------------- --------------------- --------------------- -------------------
Wealth
management 31 4 4 1 40
-------------------- --------------------- --------------------- --------------------- -------------------
16,908 27,015 412,266 54,861 511,050
-------------------- --------------------- --------------------- --------------------- -------------------
Stage 1 Stage 2 Stage 3 POCI Total
31 December
2021 EUR000 EUR000 EUR000 EUR000 EUR000
--------------------- --------------------- --------------------- --------------------- -------------------
Corporate 5,131 6,851 18,163 750 30,895
--------------------- --------------------- --------------------- --------------------- -------------------
Large and
International
corporate 4,204 6,511 28,539 734 39,988
--------------------- --------------------- --------------------- --------------------- -------------------
SMEs 1,653 3,242 8,151 276 13,322
--------------------- --------------------- --------------------- --------------------- -------------------
Retail
--------------------- --------------------- --------------------- --------------------- -------------------
-- housing 1,615 2,868 7,045 317 11,845
--------------------- --------------------- --------------------- --------------------- -------------------
-- consumer,
credit
cards and
other 2,674 4,434 8,223 1,002 16,333
--------------------- --------------------- --------------------- --------------------- -------------------
Restructuring
--------------------- --------------------- --------------------- --------------------- -------------------
-- corporate 40 1,397 5,015 2,292 8,744
--------------------- --------------------- --------------------- --------------------- -------------------
-- SMEs 79 1,139 13,970 884 16,072
--------------------- --------------------- --------------------- --------------------- -------------------
-- retail
housing 3 708 20,005 775 21,491
--------------------- --------------------- --------------------- --------------------- -------------------
-- retail
other 14 1,049 16,583 806 18,452
--------------------- --------------------- --------------------- --------------------- -------------------
Recoveries
--------------------- --------------------- --------------------- --------------------- -------------------
-- corporate - - 21,374 3,518 24,892
--------------------- --------------------- --------------------- --------------------- -------------------
-- SMEs - - 26,338 2,045 28,383
--------------------- --------------------- --------------------- --------------------- -------------------
-- retail
housing - - 152,596 27,732 180,328
--------------------- --------------------- --------------------- --------------------- -------------------
-- retail
other - - 152,691 26,643 179,334
--------------------- --------------------- --------------------- --------------------- -------------------
International
banking
services 33 1,181 102 6 1,322
--------------------- --------------------- --------------------- --------------------- -------------------
Wealth
management 11 3 1 1 16
--------------------- --------------------- --------------------- --------------------- -------------------
15,457 29,383 478,796 67,781 591,417
--------------------- --------------------- --------------------- --------------------- -------------------
Credit losses of loans and advances to customers as at 30 June 2022
and 31 December 2021 include credit losses relating to loans and
advances to customers classified as held for sale as presented in
the table below:
Stage 1 Stage 2 Stage 3 POCI Total
EUR000 EUR000 EUR000 EUR000 EUR000
-------------------- ------------------ --------------- ---------------- --------------
30 June 2022 7 438 262,821 41,333 304,599
-------------------- ------------------ --------------- ---------------- --------------
31 December 2021 - 710 262,706 42,003 305,419
-------------------- ------------------ --------------- ---------------- --------------
During the six months ended 30 June 2022 the total non--contractual
write--offs recorded by the Group amounted to EUR98,625 thousand (30
June 2021: EUR116,667 thousand). The contractual amount outstanding
on financial assets that were written off during the six months ended
30 June 2022 and that are still subject to enforcement activity is
EUR538,069 thousand (31 December 2021: EUR984,329 thousand).
Assumptions have been made about the future changes in property values,
as well as the timing for the realisation of collateral, taxes and
expenses on the repossession and subsequent sale of the collateral
as well as any other applicable haircuts. Indexation has been used
as the basis to estimate updated market values of properties supplemented
by management judgement where necessary given the difficulty in differentiating
between short term impacts and long term structural changes and the
shortage of market evidence for comparison purposes. Assumptions were
made on the basis of macroeconomic scenario for future changes in
property prices, and are capped to zero for all scenarios in case
of any future projected increase, whereas any future projected decrease
is taken into consideration.
At 30 June 2022 the weighted average haircut (including liquidity
haircut and selling expenses) used in the collectively assessed provision
calculation for loans and advances to customers is approximately 32%
under the baseline scenario (31 December 2021: approximately 32%),
excluding those classified as held for sale.
The timing of recovery from real estate collaterals used in the collectively
assessed provision calculation for loans and advances to customers
has been estimated to be on average seven years under the baseline
scenario (31 December 2021: average of seven years), excluding those
classified as held for sale.
For the calculation of individually assessed provisions, the timing
of recovery of collaterals as well as the haircuts used are based
on the specific facts and circumstances of each case.
For the calculation of expected credit losses three scenarios were
used; base, adverse and favourable with 50%, 30% and 20% probability
respectively.
For Stage 3 customers, the base scenario focuses on the following
variables, which are based on the specific facts and circumstances
of each customer: the operational cash flows, the timing of recovery
of collaterals and the haircuts from the realisation of collateral.
The base scenario is used to derive additional favourable and adverse
scenarios. Under the adverse scenario operational cash flows are decreased
by 50%, applied haircuts on real estate collateral are increased by
50% and the timing of recovery of collaterals is increased by 1 year
with reference to the baseline scenario. Under the favourable scenario,
applied haircuts are decreased by 5%, with no change in the recovery
period with reference to the baseline scenario. Assumptions used in
estimating expected future cash flows (including cash flows that may
result from the realisation of collateral) reflect current and expected
future economic conditions and are generally consistent with those
used in the Stage 3 collectively assessed exposures. In the case of
loans held for sale the Group takes into consideration the timing
of expected sale and the estimated sale proceeds in determining the
ECL.
The above assumptions are also influenced by the ongoing regulatory
dialogue BOC PCL maintains with its lead regulator, the ECB, and other
regulatory guidance and interpretations issued by various regulatory
and industry bodies such as the ECB and the EBA, which provide guidance
and expectations as to relevant definitions and the treatment/classification
of certain parameters/assumptions used in the estimation of provisions.
Any changes in these assumptions or difference between assumptions
made and actual results could result in significant changes in the
estimated amount of expected credit losses of loans and advances
to customers.
Sensitivity analysis
The Group has performed sensitivity analysis relating to the loan
portfolio in Cyprus, which represents more than 99% of the total
loan portfolio of the Group (excluding the loans and advances to
customers classified as held for sale) with reference date 30 June
2022 and 31 December 2021.
The Group has altered for the purpose of sensitivity analysis the
below parameters and the impact on the ECL, for both individually
and collectively assessed ECL calculations, is presented in the table
below:
Increase/(decrease)
on ECL for loans and
advances to customers
at amortised cost
30 June 31 December
2022 2021
--------------------
EUR000 EUR000
-------------------- ---------------------
Increase the adverse weight by 5% and decrease
the favourable weight by 5% 2,854 3,610
-------------------- ---------------------
Decrease the adverse weight by 5% and increase
the favourable weight by 5% (2,841) (3,626)
-------------------- ---------------------
Increase the expected recovery period by 1 year 4,847 8,000
-------------------- ---------------------
Decrease the expected recovery period by 1 year (4,304) (7,421)
-------------------- ---------------------
Increase the collateral realisation haircut
by 5% 13,451 19,063
-------------------- ---------------------
Decrease the collateral realisation haircut
by 5% (11,107) (16,906)
-------------------- ---------------------
Increase in the PDs of stages 1 and 2 by 20% 7,230 8,190
-------------------- ---------------------
Decrease in the PDs of stages 1 and 2 by 20% (6,870) (8,011)
-------------------- ---------------------
The increase/(decrease) on ECL, per stage, for loans and advances
to customers at amortised cost is further presented in the table below:
Stage 1 Stage 2 Stage 3 Total
30 June 2022 EUR000 EUR000 EUR000 EUR000
----------------- ----------------- ----------------- ---------------
Increase the adverse weight by
5% and decrease the favourable
weight by 5% 155 295 2,404 2,854
----------------- ----------------- ----------------- ---------------
Decrease the adverse weight by
5% and increase the favourable
weight by 5% (161) (276) (2,404) (2,841)
----------------- ----------------- ----------------- ---------------
Increase the expected recovery
period by 1 year 395 1,138 3,314 4,847
----------------- ----------------- ----------------- ---------------
Decrease the expected recovery
period by 1 year (369) (1,019) (2,916) (4,304)
----------------- ----------------- ----------------- ---------------
Increase the collateral realisation
haircut by 5% 1,076 2,888 9,487 13,451
----------------- ----------------- ----------------- ---------------
Decrease the collateral realisation
haircut by 5% (888) (2,309) (7,910) (11,107)
----------------- ----------------- ----------------- ---------------
Increase in the PDs of stages 1
and 2 by 20%* 1,875 5,355 - 7,230
----------------- ----------------- ----------------- ---------------
Decrease in the PDs of stages 1
and 2 by 20%* (2,302) (4,568) - (6,870)
----------------- ----------------- ----------------- ---------------
Stage 1 Stage 2 Stage 3 Total
31 December 2021 EUR000 EUR000 EUR000 EUR000
----------------- ----------------- ----------------- ---------------
Increase the adverse weight by
5% and decrease the favourable
weight by 5% 384 413 2,813 3,610
----------------- ----------------- ----------------- ---------------
Decrease the adverse weight by
5% and increase the favourable
weight by 5% (351) (461) (2,814) (3,626)
----------------- ----------------- ----------------- ---------------
Increase the expected recovery
period by 1 year 434 1,402 6,164 8,000
----------------- ----------------- ----------------- ---------------
Decrease the expected recovery
period by 1 year (401) (1,323) (5,697) (7,421)
----------------- ----------------- ----------------- ---------------
Increase the collateral realisation
haircut by 5% 1,215 3,742 14,106 19,063
----------------- ----------------- ----------------- ---------------
Decrease the collateral realisation
haircut by 5% (1,004) (3,266) (12,636) (16,906)
----------------- ----------------- ----------------- ---------------
Increase in the PDs of stages 1
and 2 by 20%* 2,687 5,503 - 8,190
----------------- ----------------- ----------------- ---------------
Decrease in the PDs of stages 1
and 2 by 20%* (2,882) (5,129) - (8,011)
----------------- ----------------- ----------------- ---------------
*The impact on the ECL also includes the transfer between stages of
the loans and advances to customers following the increase/ decrease
in the PD.
The sensitivity analysis performed on the collateral realisation
haircut and its impact on the ECL by business line is presented in
the table below:
Increase Decrease Increase Decrease
the collateral the collateral the collateral the collateral
realisation realisation realisation realisation
haircut haircut haircut by haircut by
by 5% by 5% 5% 5%
30 June 30 June 31 December 31 December
2022 2022 2021 2021
----------------------- ----------------------- ---------------------------- ---------------------------
EUR000 EUR000 EUR000 EUR000
----------------------- ----------------------- ---------------------------- ---------------------------
Corporate 1,687 (1,380) 1,365 (1,272)
----------------------- ----------------------- ---------------------------- ---------------------------
Large and
International
corporate 1,290 (1,228) 2,194 (1,976)
----------------------- ----------------------- ---------------------------- ---------------------------
SMEs 524 (444) 724 (627)
----------------------- ----------------------- ---------------------------- ---------------------------
Retail
----------------------- ----------------------- ---------------------------- ---------------------------
-- housing 1,492 (1,263) 1,838 (1,545)
----------------------- ----------------------- ---------------------------- ---------------------------
-- consumer,
credit cards
and
other 628 (530) 718 (653)
----------------------- ----------------------- ---------------------------- ---------------------------
Restructuring
----------------------- ----------------------- ---------------------------- ---------------------------
-- corporate 290 (254) 551 (558)
----------------------- ----------------------- ---------------------------- ---------------------------
-- SMEs 944 (852) 956 (858)
----------------------- ----------------------- ---------------------------- ---------------------------
-- retail
housing 958 (823) 1,079 (972)
----------------------- ----------------------- ---------------------------- ---------------------------
-- retail
other 380 (333) 458 (420)
----------------------- ----------------------- ---------------------------- ---------------------------
Recoveries
----------------------- ----------------------- ---------------------------- ---------------------------
-- corporate 640 (553) 748 (760)
----------------------- ----------------------- ---------------------------- ---------------------------
-- SMEs 853 (722) 1,114 (940)
----------------------- ----------------------- ---------------------------- ---------------------------
-- retail
housing 2,626 (1,899) 5,541 (4,889)
----------------------- ----------------------- ---------------------------- ---------------------------
-- retail
other 982 (680) 1,503 (1,233)
----------------------- ----------------------- ---------------------------- ---------------------------
International
banking
services 157 (146) 273 (202)
----------------------- ----------------------- ---------------------------- ---------------------------
Wealth
management - - 1 (1)
----------------------- ----------------------- ---------------------------- ---------------------------
13,451 (11,107) 19,063 (16,906)
----------------------- ----------------------- ---------------------------- ---------------------------
29.6 Currency concentration of loans and advances to customers
The following table presents the currency concentration of the Group's
loans and advances at amortised cost.
30 June 31 December
2022 2021
Gross loans at amortised cost EUR000 EUR000
-------------------- -------------------
Euro 9,478,377 9,294,950
-------------------- -------------------
US Dollar 453,374 372,263
-------------------- -------------------
British Pound 91,859 93,369
-------------------- -------------------
Russian Rouble 350 16,329
-------------------- -------------------
Romanian Lei 1 -
-------------------- -------------------
Swiss Franc 42,596 61,336
-------------------- -------------------
Other currencies 1,809 2,288
-------------------- -------------------
10,068,366 9,840,535
-------------------- -------------------
Loans and advances to customers classified as held for sale
The following table presents the currency concentration of the Group's
loans and advances at amortised cost classified as held for sale.
30 June 31 December
2022 2021
Gross loans at amortised cost EUR000 EUR000
------------------ ------------------
Euro 528,996 533,190
------------------ ------------------
US Dollar 752 700
------------------ ------------------
British Pound 226 230
------------------ ------------------
Swiss Franc 18,279 18,184
------------------ ------------------
Other currencies 3,553 3,485
------------------ ------------------
551,806 555,789
------------------ ------------------
29.7 Forbearance/Restructuring
Forbearance measures occur in situations in which the borrower is
considered to be unable to meet the terms and conditions of the contract
due to financial difficulties. Taking into consideration these difficulties,
the Group decides to modify the terms and conditions of the contract
to provide the borrower with the ability to service the debt or refinance
the contract, either partially or fully.
The practice of extending forbearance measures constitutes a grant
of a concession whether temporarily or permanently to that borrower.
A concession may involve restructuring the contractual terms of a
debt or payment in some form other than cash, such as an arrangement
whereby the borrower transfers collateral pledged to the Group.
The loans forborne continue to be classified as Stage 3 in the case
they are performing forborne exposures under probation for which
additional forbearance measures are extended, or performing forborne
exposures, previously classified as NPEs that present more than 30
days past due within the probation period.
Modifications of loans and advances that do not affect payment arrangements,
such as restructuring of collateral or security arrangements, are
not regarded as sufficient to categorise the facility as credit impaired,
as by themselves they do not necessarily indicate credit distress
affecting payment ability such that would require the facility to
be classified as NPE.
Rescheduled loans and advances are those facilities for which the
Group has modified the repayment programme (e.g. provision of a grace
period, suspension of the obligation to repay one or more instalments,
reduction in the instalment amount and/or elimination of overdue
instalments relating to capital or interest).
For an account to qualify for rescheduling it must meet certain criteria
including that the customer must be considered to be viable. The
extent to which the Group reschedules accounts that are eligible
under its existing policies may vary depending on its view of the
prevailing economic conditions and other factors which may change
from year to year. In addition, exceptions to policies and practices
may be allowed in specific situations in response to legal or regulatory
agreements or orders.
The forbearance characteristic contributes in two specific ways for
the calculation of lifetime ECL for each individual facility. Specifically,
it is taken into consideration in the scorecard development where
if this characteristic is identified as statistically significant
it affects negatively the rating of each facility. It also contributes
in the construction through the cycle probability of default and
cure curves, where when feasible a specific curve for the forborne
products is calculated and assigned accordingly.
Forbearance activities may include measures that restructure the
borrower's business (operational restructuring) and/or measures that
restructure the borrower's financing (financial restructuring).
Restructuring options may be of a short or long term nature or a
combination thereof. The Group has developed and deployed sustainable
restructuring solutions, which are suitable for the borrower and
acceptable for the Group.
Short--term restructuring solutions are defined as restructured repayment
solutions of duration of less than two years. In the case of loans
for the construction of commercial property and project finance,
a short--term solution may not exceed one year.
Short--term restructuring solutions can include the following:
* Suspension of capital or capital and interest:
granting to the borrower a grace period in the
payment of capital (i.e. during this period only
interest is paid) or capital and interest, for a
specific period of time.
* Reduced payments: decrease of the amount of repayment
instalments over a defined short term period in order
to accommodate the borrower's new cash flow position.
* Arrears and/or interest capitalisation:
capitalisation of the arrears and of any unpaid
interest to the outstanding principal balance for
repayment under a rescheduled program.
Long--term restructuring solutions can include the following:
* Interest rate reduction: permanent or temporary
reduction of interest rate (fixed or variable) into a
fair and sustainable rate.
* Extension of maturity: extension of the maturity of
the loan which allows a reduction in instalment
amounts by spreading the repayments over a longer
period.
* Sale of Assets: Part of the restructuring can be the
agreement with the borrower for immediate or on time
sale of assets (mainly real estate) to reduce
borrowing.
* Modification of existing terms of previous decisions:
In the context of the new sustainable settlement /
restructuring solution, review any terms of previous
decisions that may not be met.
* Consolidation / refinancing of Existing Facilities:
In cases where the borrower maintains several
separate loans with different collaterals, these can
be consolidated and a new repayment schedule can be
set and the new loan can be secured with all existing
collaterals.
* Hard Core Current Account Limit: In such cases a loan
with a longer repayment may be offered to replace /
reduce the current account limit.
* Split and freeze: the customer's debt is split into
sustainable and unsustainable parts. The sustainable
part is restructured to a sustainable repayment
program. The unsustainable part is 'frozen' for the
restructured duration of the sustainable part. At the
maturity of the restructuring, the frozen part is
either forgiven pro rata (based on the actual
repayment of the sustainable part) or restructured.
* Rescheduling of payments: the existing contractual
repayment schedule is adjusted to a new sustainable
repayment program based on a realistic, current and
forecasted, assessment of the cash flow generation of
the borrower.
* Liquidation Collateral: An agreement between BOC PCL
and a borrower for the voluntary sale of mortgaged
assets, for partial or full repayment of the debt.
* Currency Conversion: This solution is provided to
match the credit facility currency and the borrower's
income currency.
* Additional Financing: This solution can be granted,
simultaneously with the restructuring of the existing
credit facilities of the borrower, to cover any
financing gap.
* Partial or full write--off: BOC PCL agrees to seize
the right to recover part of the debt or the entire
amount due from the borrower (such as Fast
Settlement), according to the provisions of the
respective write--off policy.
* Debt/equity swaps: debt restructuring that allows
partial or full repayment of the debt in exchange of
obtaining an equivalent amount of equity by the Group,
with the remaining debt right sized to the cash flows
of the borrower to allow repayment. This solution is
used only in exceptional cases and only where all
other efforts for restructuring are exhausted and
after ensuring compliance with the banking law.
* Debt/asset swaps: agreement between the Group and the
borrower to voluntarily transfer the mortgaged asset
or other immovable property to the Group, to
partially or fully repay the debt. Any residual debt
may be restructured within an appropriate repayment
schedule in line with the borrower's reassessed
repayment ability.
29.8 Rescheduled loans and advances to customers
The below table presents the movement of the Group's rescheduled
loans and advances to customers measured at amortised cost including
those classified as held for sale. The rescheduled loans related
to loans and advances classified as held for sale as at 30 June 2022
amounts to EUR238,195 thousand (31 December 2021: EUR245,452 thousand
and 30 June 2021: nil).
30 June 30 June
2022 2021
EUR000 EUR000
------------------- ------------------
1 January 1,469,182 1,981,825
------------------- ------------------
New loans and advances rescheduled in the period 56,411 405,472
------------------- ------------------
Loans no longer classified as rescheduled and repayments (148,629) (283,370)
------------------- ------------------
Write off of rescheduled loans and advances (39,834) (58,758)
------------------- ------------------
Interest accrued on rescheduled loans and advances 26,911 25,932
------------------- ------------------
Foreign exchange adjustments 1,127 385
------------------- ------------------
Derecognition of Helix 2 portfolio - (733,448)
------------------- ------------------
30 June 1,365,168 1,338,038
------------------- ------------------
The classification as forborne loans is discontinued when all EBA
criteria for the discontinuation of the classification as forborne
exposure are met. The criteria are set out in the EBA Final draft
Implementing Technical Standards (ITS) on supervisory reporting and
non--performing exposures.
The below tables present the Group's rescheduled loans and advances
to customers by staging, economic activity and business line classification
excluding those classified as held for sale, as well as ECL allowances
and tangible collateral held for such rescheduled loans.
30 June 31 December
2022 2021
EUR000 EUR000
------------------- -----------------
Stage 1 - 6,883
------------------- -----------------
Stage 2 818,330 828,849
------------------- -----------------
Stage 3 281,832 348,385
------------------- -----------------
POCI 26,811 39,613
------------------- -----------------
1,126,973 1,223,730
------------------- -----------------
Fair value of collateral
30 June 31 December
2022 2021
EUR000 EUR000
------------------- -----------------
Stage 1 - 6,751
------------------- -----------------
Stage 2 774,087 782,843
------------------- -----------------
Stage 3 230,213 275,882
------------------- -----------------
POCI 23,355 37,824
------------------- -----------------
1,027,655 1,103,300
------------------- -----------------
The fair value of collateral presented above has been computed based
to the extent that the collateral mitigates credit risk.
Credit risk concentration
30 June 31 December
2022 2021
By economic activity EUR000 EUR000
--------------- ----------------
Trade 44,452 52,714
--------------- ----------------
Manufacturing 14,925 16,217
--------------- ----------------
Hotels and catering 264,027 259,534
--------------- ----------------
Construction 230,792 164,871
--------------- ----------------
Real estate 136,820 196,522
--------------- ----------------
Private individuals 336,966 414,463
--------------- ----------------
Professional and other services 78,528 96,714
--------------- ----------------
Other sectors 20,463 22,695
--------------- ----------------
1,126,973 1,223,730
--------------- ----------------
30 June 2022 Stage 1 Stage 2 Stage 3 POCI Total
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- -------------------- -----------------
Corporate - 272,991 4,267 2,964 280,222
------------------- ------------------- ------------------- -------------------- -----------------
Large and
international
corporate - 312,715 54,841 - 367,556
------------------- ------------------- ------------------- -------------------- -----------------
SMEs - 79,657 1,701 923 82,281
------------------- ------------------- ------------------- -------------------- -----------------
Retail
------------------- ------------------- ------------------- -------------------- -----------------
-- housing - 63,318 29,528 1,926 94,772
------------------- ------------------- ------------------- -------------------- -----------------
-- consumer,
credit
cards and
other - 23,247 13,118 847 37,212
------------------- ------------------- ------------------- -------------------- -----------------
Restructuring
------------------- ------------------- ------------------- -------------------- -----------------
-- corporate - 21,977 4,003 1 25,981
------------------- ------------------- ------------------- -------------------- -----------------
-- SMEs - 11,004 19,118 2,303 32,425
------------------- ------------------- ------------------- -------------------- -----------------
-- retail
housing - 19,112 44,426 3,524 67,062
------------------- ------------------- ------------------- -------------------- -----------------
-- retail
other - 3,841 11,057 419 15,317
------------------- ------------------- ------------------- -------------------- -----------------
Recoveries
------------------- ------------------- ------------------- -------------------- -----------------
-- corporate - - 9,518 1,831 11,349
------------------- ------------------- ------------------- -------------------- -----------------
-- SMEs - - 10,611 2,250 12,861
------------------- ------------------- ------------------- -------------------- -----------------
-- retail
housing - - 58,985 7,109 66,094
------------------- ------------------- ------------------- -------------------- -----------------
-- retail
other - - 17,737 2,386 20,123
------------------- ------------------- ------------------- -------------------- -----------------
International
banking
services - 10,468 2,922 1 13,391
------------------- ------------------- ------------------- -------------------- -----------------
Wealth
management - - - 327 327
------------------- ------------------- ------------------- -------------------- -----------------
- 818,330 281,832 26,811 1,126,973
------------------- ------------------- ------------------- -------------------- -----------------
31 December Stage 1 Stage 2 Stage 3 POCI Total
2021
By business
line EUR000 EUR000 EUR000 EUR000 EUR000
------------------- ------------------- ------------------- ------------------- -----------------
Corporate 6,461 255,488 14,735 - 276,684
------------------- ------------------- ------------------- ------------------- -----------------
Large and
international
corporate - 303,823 53,667 - 357,490
------------------- ------------------- ------------------- ------------------- -----------------
SMEs - 96,654 5,736 3,972 106,362
------------------- ------------------- ------------------- ------------------- -----------------
Retail
------------------- ------------------- ------------------- ------------------- -----------------
-- housing 381 97,548 38,276 2,548 138,753
------------------- ------------------- ------------------- ------------------- -----------------
-- consumer,
credit
cards and
other 41 29,578 16,181 1,206 47,006
------------------- ------------------- ------------------- ------------------- -----------------
Restructuring
------------------- ------------------- ------------------- ------------------- -----------------
-- corporate - 6,941 8,882 6,013 21,836
------------------- ------------------- ------------------- ------------------- -----------------
-- SMEs - 8,705 23,410 3,775 35,890
------------------- ------------------- ------------------- ------------------- -----------------
-- retail
housing - 13,500 49,746 3,362 66,608
------------------- ------------------- ------------------- ------------------- -----------------
-- retail
other - 5,047 15,088 426 20,561
------------------- ------------------- ------------------- ------------------- -----------------
Recoveries
------------------- ------------------- ------------------- ------------------- -----------------
-- corporate - - 17,503 2,293 19,796
------------------- ------------------- ------------------- ------------------- -----------------
-- SMEs - - 12,402 1,980 14,382
------------------- ------------------- ------------------- ------------------- -----------------
-- retail
housing - - 70,951 10,367 81,318
------------------- ------------------- ------------------- ------------------- -----------------
-- retail
other - - 19,313 3,165 22,478
------------------- ------------------- ------------------- ------------------- -----------------
International
banking
services - 11,565 2,495 99 14,159
------------------- ------------------- ------------------- ------------------- -----------------
Wealth
management - - - 407 407
------------------- ------------------- ------------------- ------------------- -----------------
6,883 828,849 348,385 39,613 1,223,730
------------------- ------------------- ------------------- ------------------- -----------------
ECL allowance
30 June 31 December
2022 2021
EUR000 EUR000
------------------- --------------------
Stage 1 - 8
------------------- --------------------
Stage 2 12,276 13,349
------------------- --------------------
Stage 3 93,731 120,345
------------------- --------------------
POCI 5,719 10,218
------------------- --------------------
111,726 143,920
------------------- --------------------
30. Risk management -- Market risk
Market risk is the risk of loss from adverse changes in market prices
namely from changes in interest rates, exchange rates, property and
security prices. The Market Risk department is responsible for monitoring
the risk on financial instruments resulting from such changes with
the objective to minimise the impact on earnings and capital. The
department also monitors liquidity risk and credit risk with counterparties
and countries. It is also responsible for monitoring compliance with
the various market risk policies and procedures.
Interest rate risk
Interest rate risk refers to the current or prospective risk to Group's
capital and earnings arising from adverse movements in interest rates
that affect the Group's banking book positions.
Interest rate risk is measured mainly using the impact on net interest
income and impact on economic value. In addition to the above measures,
interest rate risk is also measured using interest rate risk gap
analysis where the assets, liabilities and off--balance sheet items,
are classified according to their remaining repricing period. Items
that are not sensitive to rate changes are recognised as non--rate
sensitive (NRS) items. The present value of 1 basis point (PV01)
is also calculated. Interest rate risk is managed through a 1 Year
Interest Rate Effect (IRE) limit on the maximum reduction of net
interest income under the various interest rate shock scenarios.
Limits are set as a percentage of the Group capital and as a percentage
of the net interest income. There are different limits for the Euro
and the US Dollar.
Sensitivity analysis
The table below sets out the impact on the Group's net interest income,
over a one--year period, from reasonably possible changes in the
interest rates of the main currencies using the assumption of the
prevailing market risk policy for the current and the comparative
period:
Impact on Net Interest
Income in EUR000
30 June 31 December
2022 2021
(50 bps (50 bps
for Euro for Euro
and 60 bps and 60 bps
Currency Interest Rate Scenario for US Dollar) for US Dollar)
----------------------- ----------------
All Parallel up 53,336 35,677
----------------------- ---------------- ----------------
All Parallel down (48,311) (28,235)
----------------------- ---------------- ----------------
All Steepening (33,955) (19,944)
----------------------- ---------------- ----------------
All Flattening 42,534 25,546
----------------------- ---------------- ----------------
All Short up 51,166 33,182
----------------------- ---------------- ----------------
All Short down (47,077) (28,169)
----------------------- ---------------- ----------------
Euro Parallel up 52,302 34,484
Euro Parallel down (46,103) (26,230)
--------------- ---------------- ----------------
Euro Steepening (31,851) (17,866)
--------------- ---------------- ----------------
Euro Flattening 42,107 25,153
--------------- ---------------- ----------------
Euro Short up 50,287 32,200
--------------- ---------------- ----------------
Euro Short down (44,121) (25,208)
--------------- ---------------- ----------------
US Dollar Parallel up 1,034 1,193
US Dollar Parallel down (2,208) (2,005)
--------------- ------------------ ------------------
US Dollar Steepening (2,104) (2,078)
--------------- ------------------ ------------------
US Dollar Flattening 427 393
--------------- ------------------ ------------------
US Dollar Short up 879 982
--------------- ------------------ ------------------
US Dollar Short down (2,956) (2,961)
--------------- ------------------ ------------------
The table below sets out the impact on the Group's equity, from reasonably
possible changes in the interest rates under various interest rate
scenarios for the Euro and the US Dollar in line with the EBA guidelines.
Impact on Equity in EUR000
30 June 31 December
2022 2021
(50 bps (50 bps
for Euro for Euro
and 60 bps and 60 bps
Currency Interest Rate Scenario for US Dollar) for US Dollar)
----------------------- ------------------
All Parallel up 5,147 (14,964)
----------------------- ------------------ ------------------
All Parallel down (9,228) 23,698
----------------------- ------------------ ------------------
All Steepening (11,749) (9,300)
----------------------- ------------------ ------------------
All Flattening 8,207 8,986
----------------------- ------------------ ------------------
All Short up 10,396 3,616
----------------------- ------------------ ------------------
All Short down (20,326) 6,273
----------------------- ------------------ ------------------
Euro Parallel up 4,313 (18,080)
Euro Parallel down (1,804) 60,603
--------------- ------------------ ------------------
Euro Steepening (11,128) (7,836)
--------------- ------------------ ------------------
Euro Flattening 17,544 17,714
--------------- ------------------ ------------------
Euro Short up 16,315 2,234
--------------- ------------------ ------------------
Euro Short down (13,550) 26,386
--------------- ------------------ ------------------
US Dollar Parallel up 5,980 6,232
US Dollar Parallel down (7,424) (6,604)
------------------ ---------------------- ----------------------
US Dollar Steepening (621) (1,464)
------------------ ---------------------- ----------------------
US Dollar Flattening (565) 258
------------------ ---------------------- ----------------------
US Dollar Short up 4,476 4,998
------------------ ---------------------- ----------------------
US Dollar Short down (6,776) (6,920)
------------------ ---------------------- ----------------------
The aggregation of the impact on equity was performed as per the EBA
guidelines by adding the negative and 50% of the positive impact of
each scenario.
In addition to the above fluctuations in net interest income, interest
rate changes can result in fluctuations in the fair value of investments
at FVPL (including investments held for trading) and in the fair value
of derivative financial instruments.
The equity of the Group is also affected by changes in market interest
rates. The impact on the Group's equity arises from changes in the
fair value of fixed rate debt securities classified at FVOCI.
The sensitivity analysis is based on the assumption of a parallel
shift of the yield curve. The table below sets out the impact on the
Group's profit/loss before tax and equity as a result of reasonably
possible changes in the interest rates of the major currencies.
Parallel change in interest rates Impact on profit/loss Impact on equity
((increase)/decrease in net before tax
interest income)
30 June 2022 EUR000 EUR000
-------------------------------- --------------------------------
+0.6% for US Dollar
+0.5% for Euro
+1.0% for British Pound (619) (504)
-------------------------------- --------------------------------
--0.6% for US Dollar
--0.5% for Euro
--1.0% for British Pound 619 504
-------------------------------- --------------------------------
Impact on profit/loss Impact on equity
before tax
Parallel change in interest rates
((increase)/decrease in net
interest income) EUR000 EUR000
-------------------------------- --------------------------------
31 December 2021
-------------------------------- --------------------------------
+0.6% for US Dollar
+0.5% for Euro
+1.0% for British Pound 1,219 (739)
-------------------------------- --------------------------------
--0.6% for US Dollar
--0.5% for Euro
--1.0% for British Pound (782) 739
-------------------------------- --------------------------------
Interest rate benchmark reform
The LIBOR and the EURIBOR (collectively referred to as IBORs) are
the subject of international, national and other regulatory guidance
and proposals for reform. Some of these reforms are already effective
while others are still to be implemented as explained further below.
These reforms may cause such benchmarks to perform differently from
the past or cease to exist entirely or have other consequences that
cannot be predicted.
Regarding LIBOR reform, regulators and industry working groups have
identified alternative rates to transition to. On 5 March, 2021 the
Financial Conduct Authority (FCA) confirmed that all LIBOR settings
would either cease to be provided by any administrator or no longer
be representative of the underlying market they intended to measure:
* immediately after 31 December 2021, in the case of
all sterling, euro, Swiss franc and Japanese yen
settings, and the 1 week and 2 month US dollar
settings; and
* immediately after 30 June 2023, in the case of the
remaining US dollar settings.
In October 2021, the European Commission designated a statutory replacement
rate for certain settings of CHF LIBOR. On 16 November 2021, the Financial
Conduct Authority of the United Kingdom (UK FCA) confirmed that they
would permit the temporary use of the synthetic GBP and JPY LIBOR
in all legacy LIBOR contracts, other than cleared derivatives that
have not been changed at or ahead of end--31 December 2021. Also,
under their new use restriction power they would prohibit new use
of USD LIBOR from the end of 2021, except in specific circumstances.
How the Group is managing the transition to alternative benchmark
rates
BOC PCL established a project to manage the transition to alternative
interest rate benchmarks with the Director of Treasury as the project
owner and with oversight from a dedicated Benchmark Steering Committee.
The main divisions involved in the project at the highest level are
the Legal Department, Treasury, Risk Management, Finance, Information
Technology (IT), Operations and the business lines. The Assets and
Liabilities Committee (ALCO) monitors the project on a regular basis.
The Group's transition project also involved the drawing up of appropriate
fallback provisions for LIBOR linked contracts and transition mechanisms
in its floating rate assets and liabilities with maturities after
2021.
For the legacy non--cleared derivatives exposures, the Group has adhered
to the International Swaps and Derivatives Association (ISDA) protocol
which came into effect in January 2021, while for cleared derivatives,
BOC PCL adopted the market wide standardised approach to be followed
by the relevant clearing house.
The Group proactively engaged with its customer base and market counterparties
for the amendment of substantially all impacted LIBOR contracts (other
than the relevant contracts referencing to USD LIBOR and which they
will cease on 30 June 2023) by 31 December 2021 for transitioning
to alternative rates. Those legacy credit facilities in CHF for which
the contract was not amended by the first interest period commencing
in 2022 ('tough legacy'), have been transitioned to the statutory
rate provided by EU legislation. The Group has also made the necessary
arrangements to transition its tough legacy GBP and JPY credit facilities
to alternative rates by notifying its customer base accordingly and
reserving the right to use a statutory rate provided by EU legislation
in case such a rate is nominated in the future. Specifically, in
anticipation that the European Commission might not designate an
alternative rate for JPY and GBP Libor, the Group has informed its
customers of its decision to transition tough legacy JPY and GBP
LIBOR credit facilities to the same alternative rates, as if the
customer has signed the relevant contract amendment. This would ensure
that customers would not be treated differently to other similar
customers on the same JPY and GBP LIBOR tenor who have signed their
contract amendment. The Group has also engaged in client communication
to inform customers and ensure a smooth transition of non--USD LIBOR
credit facilities to RFRs.
New RFR lending products have also been introduced and adopted across
the Group's key currencies.
The Group's project for the transition to alternative interest rate
benchmarks is now focused of the transition of USD LIBOR contracts
ahead of the June 2023 deadline.
BOC PCL has dedicated teams in place to support the transition and
continuously assess, monitor and dynamically manage risks arising
from the transition when required.
The Group has also been actively monitoring for any market and regulatory
developments published by regulatory bodies as well as by relevant
Working Groups across various jurisdictions.
The Group will continue to assess, monitor and dynamically manage
risks, and implement specific mitigating controls when required,
progressing towards an orderly transition to alternative benchmarks.
The following table summarises the significant non--derivative exposures
impacted by interest rate benchmark reform which have yet to transition
as at 30 June 2022 and 31 December 2021 to the replacement benchmark
rate at the respective date:
USD Other
30 June 2022 LIBOR LIBOR Total
Non--derivative financial assets EUR000 EUR000 EUR000
-------------- -------------- -------------
Loans and advances to customers 451,218 - 451,218
-------------- -------------- -------------
Loans and advances to banks 42,081 2,104 44,185
-------------- -------------- -------------
Total 493,299 2,104 495,403
-------------- -------------- -------------
Non--derivative financial liabilities
-------------- -------------- -------------
Deposits by banks 114 374 488
-------------- -------------- -------------
Total 114 374 488
-------------- -------------- -------------
GBP USD CHF Other
31 December 2021 LIBOR LIBOR LIBOR LIBOR Total
Non--derivative financial assets EUR000 EUR000 EUR000 EUR000 EUR000
-------------- ------------- -------------- -------------- ------------
Loans and advances to customers 92,819 364,113 26,727 1,627 485,286
-------------- ------------- -------------- -------------- ------------
Loans and advances to banks 18,341 87,397 4,984 10,261 120,983
-------------- ------------- -------------- -------------- ------------
Total 111,160 451,510 31,711 11,888 606,269
-------------- ------------- -------------- -------------- ------------
Non--derivative financial liabilities
-------------- ------------- -------------- -------------- ------------
Deposits by banks 113 7,658 - 503 8,274
-------------- ------------- -------------- -------------- ------------
Total 113 7,658 - 503 8,274
-------------- ------------- -------------- -------------- ------------
EURIBOR is in compliance with the EU Benchmarks Regulation and can
continue to be used as a benchmark interest rate for existing and
new contracts. The Group therefore, does not consider that Group's
exposure to EURIBOR is affected by the BMR reform.
For derivatives in hedging relationships subject to IBOR reform refer
to Note 14.
Currency risk
Currency risk is the risk that the fair value of future cash flows
of a financial instrument will fluctuate because of changes in foreign
exchange rates.
The impact on equity arises mainly from the impact of hedging instruments
used to hedge part of the net assets of the subsidiaries. At Group
level, there is an approximately equal and opposite impact on equity
from the revaluation of the net assets of the foreign operations
of the Group.
Price risk
Equity securities price risk
The risk of loss from changes in the price of equity securities arises
when there is an unfavourable change in the prices of equity securities
held by the Group as investments.
Debt securities price risk
Debt securities price risk is the risk of loss as a result of adverse
changes in the prices of debt securities held by the Group. Debt
security prices change as the credit risk of the issuer changes and/or
as the interest rate changes for fixed rate securities. The Group
invests a significant part of its liquid assets in highly rated securities.
The average Moody's Investors Service rating of the debt securities
portfolio of the Group as at 30 June 2022 was A3 (31 December 2021:
A3). The average rating excluding the Cyprus Government bond and
non--rated transactions as at 30 June 2022 was Aa2 (31 December 2021:
Aa2).
Property price risk
A significant part of the Group's loan portfolio is secured by real
estate the majority of which is located in Cyprus. Furthermore, the
Group holds a substantial number of properties mainly arising from
loan restructuring activities; the enforcement of loan collateral
and debt for asset swaps. These properties are held by the Group
primarily as stock of properties and some are held as investment
properties.
Property risk is the risk that the Group's business and financial
position will be affected by adverse changes in the demand for, and
prices of, real estate, or by regulatory capital requirements relating
to increased charges with respect to the stock of properties held.
31. Risk management -- Liquidity and funding risk
Liquidity Risk
Liquidity risk is the risk that the Group is unable to fully or promptly
meet current and future payment obligations as and when they fall
due. This risk includes the possibility that the Group may have to
raise funding at high cost or sell assets at a discount to fully
and promptly satisfy its obligations.
It reflects the potential mismatch between incoming and outgoing
payments, taking into account unexpected delays in repayment and
unexpectedly high payment outflows. Liquidity risk involves both
the risk of unexpected increases in the cost of funding of the portfolio
of assets and the risk of being unable to liquidate a position in
a timely manner on reasonable terms.
In order to limit this risk, management has adopted a strategy of
managing assets with liquidity in mind and monitoring cash flows
and liquidity on a daily basis. The Group has developed internal
control processes and contingency plans for managing liquidity risk.
Management and structure
The Board of Directors sets the Group's Liquidity Risk Appetite which
defines the level of risk at which the Group should operate.
The Board of Directors, through its Risk Committee, approves the
Liquidity Policy Statement and reviews at frequent intervals the
liquidity position of the Group.
The ALCO is responsible for setting the policies for the effective
management and monitoring of liquidity risk across the Group.
The Treasury Division is responsible for liquidity management at
Group level to ensure compliance with internal policies and regulatory
liquidity requirements and provide direction as to the actions to
be taken regarding liquidity needs. Treasury assesses on a continuous
basis, the adequacy of the liquid assets and takes the necessary
actions to ensure a comfortable liquidity position.
Liquidity is also monitored daily by Market Risk, to ensure compliance
with both internal policies and limits, and with the limits set by
the regulatory authorities. Market Risk reports the liquidity position
to ALCO at least monthly. It also provides the results of various
stress tests to ALCO at least quarterly.
Liquidity is monitored and managed on an ongoing basis through:
(i) Risk appetite: established Group Risk Appetite together with
the appropriate limits for the management of all risks including
liquidity risk.
(ii) Liquidity policy: sets the responsibilities for managing liquidity
risk as well as the framework, limits and stress test assumptions.
(iii) Liquidity limits: a number of internal and regulatory limits
are monitored on a daily, monthly and quarterly basis. Where applicable,
a traffic light system (RAG) has been introduced for the ratios,
in order to raise flags and take action when the ratios deteriorate.
(iv) Early warning indicators: monitoring of a range of indicators
for early signs of liquidity risk in the market or specific to the
Group. These are designed to immediately identify the emergence of
increased liquidity risk so as to maximise the time available to
execute appropriate mitigating actions.
(v) Liquidity Contingency Plan: maintenance of a Liquidity Contingency
Plan (LCP) which is designed to provide a framework where a liquidity
stress could be effectively identified and managed. The LCP provides
a communication plan and includes management actions to respond to
liquidity stresses.
(vi) Recovery Plan: the Group has developed a Recovery Plan (RP),
the key objectives of which are, among others, to set key Recovery
and Early Warning Indicators and to set in advance a range of recovery
options to enable the Group to be adequately prepared to respond
to stressed conditions and restore the Group's liquidity position.
Monitoring process
Daily
The daily monitoring of customer flows and the stock of highly liquid
assets is important to safeguard and ensure the uninterrupted operations
of the Group's activities. Market risk prepares a daily report analysing
the internal liquidity buffer and comparing it to the previous day's
buffer. The historical summary results of this report are made available
to ALCO members and to members of the Risk Division, Treasury and
Financial Control department. In addition, Treasury monitors daily
and intraday the customer inflows and outflows in the main currencies
used by the Group.
Market Risk also prepares daily stress testing for bank specific,
market wide and combined scenarios. The requirement is to have sufficient
liquidity buffer to enable BOC PCL to survive a twelve--month stress
period, including capacity to raise funding under all scenarios.
Moreover, an intraday liquidity stress test takes place to ensure
that the Group maintains sufficient liquidity buffer in immediately
accessible form, to enable it to meet the stressed intraday payments.
The liquidity buffer is made up of: Banknotes, CBC balances (excluding
the Minimum Reserve Requirements (MRR)), unpledged cash and nostro
current accounts, as well as money market placements up to the stress
horizon, available ECB credit line and market value net of haircut
of unencumbered/available liquid bonds.
The designing of the stress tests followed guidance and was based
on the liquidity risk drivers which are recognised internationally
by both the Prudential Regulation Authority (PRA) and EBA. In addition,
it takes into account SREP recommendations as well as the Annual
Risk Identification Process of the Group. The stress test assumptions
are included in the Group Liquidity Policy which is reviewed on an
annual basis and approved by the Board. However, whenever it is considered
appropriate to amend the assumptions during the year, approval is
requested from ALCO and the Board Risk Committee. The main items
shocked in the different scenarios are: deposit outflows, wholesale
funding, loan repayments, off balance sheet commitments, marketable
securities, own issue covered bond, additional credit claims, interbank
takings and cash collateral for derivatives and repos (as applicable).
Weekly
Market Risk prepares a report indicating the level of Liquid Assets
including Credit Institutions Money Market Placements as per LCR
definitions.
Monthly
Market Risk prepares reports monitoring compliance with internal
and regulatory liquidity ratios requirements and submits them to
the ALCO, the Executive Committee and the Board Risk Committee. It
also calculates the expected flows under a stress scenario and compares
them with the available liquidity buffer in order to calculate the
survival days. The fixed deposit renewal rates, the percentage of
International Banking Services deposits over total deposits and the
percentage of instant access deposits are also presented. The liquidity
mismatch in the form of the Maturity Ladder report (for both contractual
and behavioural flows) is presented to ALCO and the resulting 30--day
mismatch between assets and liabilities is compared to previous month's
mismatch.
Market Risk also prepares a monthly liquidity report which is submitted
to the ECB. The report includes information on deposits breakdown,
cash flow information, survival period, LCR ratio, rollover of funding,
funding gap (through the Maturity ladder analysis), concentration
of funding and collateral details. It concludes on the overall liquidity
position of BOC PCL and describes the measures implemented and to
be implemented in the short term to improve liquidity position if
needed.
Market Risk reports the LCR and Additional Liquidity Monitoring Metrics
(ALMM) to the CBC/ECB on a monthly basis.
Quarterly
The results of the stress testing scenarios prepared daily are reported
to ALCO and Board Risk Committee quarterly as part of the quarterly
Internal Liquidity Adequacy Assessment Process (ILAAP) review. Market
Risk reports the Net Stable Funding Ratio (NSFR) to the CBC/ECB on
a quarterly basis.
Annually
The Group prepares on an annual basis its ILAAP package. The ILAAP
package provides a holistic view of the Group's liquidity adequacy
under normal and stress conditions. Within ILAAP, the Group evaluates
its liquidity risk in the context of established policies, processes
for the identification, measurement, management and monitoring of
liquidity risk implemented by the institution.
As part of the Group's procedures for monitoring and managing liquidity
risk, there is a Group Liquidity Contingency Plan (LCP) for handling
liquidity difficulties. The LCP details the steps to be taken in
the event that liquidity problems arise, which escalate to a special
meeting of the extended ALCO. The LCP sets out the members of this
committee and a series of the possible actions that can be taken.
The LCP is tested annually. The LCP, which forms part of the Group's
Liquidity Policy, is reviewed by ALCO at least annually, during the
ILAAP review. The ALCO submits the updated Liquidity Policy with
its recommendations to the Board through the Board Risk Committee
for approval. The approved Liquidity Policy is notified to the SSM.
Liquidity ratios
The Group LCR is calculated based on the Delegated Regulation (EU)
2015/61. It is designed to establish a minimum level of high--quality
liquid assets sufficient to meet an acute stress lasting for 30 calendar
days. he minimum requirement is 100%. The Group also calculates its
NSFR as per Capital Requirements Regulation II (CRR II), enforced
in June 2021, with the limit set at 100%. The NSFR is the ratio of
available stable funding to required stable funding. NSFR has been
developed to promote a sustainable maturity structure of assets and
liabilities.
Funding risk
Funding risk is the risk that the Group does not have sufficiently
stable sources of funding or access to sources of funding may not
always be available at a reasonable cost and thus the Group may fail
to meet its obligations, including regulatory ones (e.g. MREL).
Main sources of funding
As at 30 June 2022 the Group's main sources of funding were its deposit
base and central bank funding, through the Eurosystem monetary policy
operations. Wholesale funding is also becoming an important source
of funding, following the refinancing of the Tier 2 for EUR300 million
in April 2021 and the issuance of senior preferred debt of EUR300
million in June 2021.
With respect to TLTRO III operations, BOC PCL borrowed in March 2021
an amount of EUR1,700 million and in June 2021 another EUR300 million,
having previously borrowed in June 2020 EUR1,000 million under the
TLTRO III, given the favourable borrowing rate, in combination with
the relaxation of collateral terms (lower haircuts and widening of
eligibility of credit claims), all being part of the ECB's COVID
19 aid package. As a result, at 30 June 2022 the carrying value of
the ECB funding was EUR2,955 million (31 December 2021: EUR2,970
million).
As at 30 June 2022, the wholesale funding nominal amount was EUR820
million (31 December 2021: EUR856 million). This includes funding
raised from the wholesale debt capital markets of EUR220 million
AT1 issued in December 2018, EUR300 million new Tier 2 issued in
April 2021 and EUR300 million senior preferred debt issued in June
2021. In January 2022, BOC PCL redeemed the remaining EUR36 million
outstanding of the Tier 2 issued in January 2017.
Funding to subsidiaries
The funding provided by BOC PCL to its subsidiaries for liquidity
purposes is repayable as per the terms of the respective agreements.
Any new funding to subsidiaries requires approval from the ECB and
the CBC.
The subsidiaries may proceed with dividend distributions in the form
of cash to BOC PCL, provided that they are not in breach of their
regulatory capital and liquidity requirements, where applicable.
Certain subsidiaries have a recommendation from their regulator to
exercise caution and prudence regarding dividend distributions and
to consider the impact of COVID--19 on their operating models, solvency,
liquidity and financial position.
Collateral requirements and other disclosures
Collateral requirements
The carrying values of the Group's encumbered assets as at 30
June 2022 and 31 December 2021 are summarised below:
30 June 31 December
2022 2021
EUR000 EUR000
------------------- ------------------
Cash and other liquid assets 66,579 102,463
------------------- ------------------
Investments 1,369,471 1,260,158
------------------- ------------------
Loans and advances 3,283,003 3,126,803
------------------- ------------------
4,719,053 4,489,424
------------------- ------------------
Cash is mainly used to cover collateral required for derivatives,
trade finance transactions and guarantees issued. It may also be used
as part of the supplementary assets for the covered bond. The decrease
in cash and other liquid assets presented as encumbered assets during
the six months ended 30 June 2022 was driven mainly by the decrease
in cash encumbered for derivatives.
As at 30 June 2022 and 31 December 2021, investments are mainly used
as collateral for ECB funding or as supplementary assets for the covered
bond. The increase in the investments presented as encumbered assets
during the six months ended 30 June 2022 was driven by the pledging
of additional debt securities to the ECB in anticipation of the gradual
phasing out of the pandemic collateral easing measures effective from
8 July 2022.
Loans and advances indicated as encumbered as at 30 June 2022 and
31 December 2021 are mainly used as collateral for funding from the
ECB and the covered bond.
Loans and advances to customers include mortgage loans of a nominal
amount of EUR1,005 million as at 30 June 2022 (31 December 2021: EUR1,007
million) in Cyprus, pledged as collateral for the covered bond issued
by BOC PCL in 2011 under its Covered Bond Programme. Furthermore as
at 30 June 2022 housing loans of a nominal amount of EUR2,223 million
(31 December 2021: EUR2,091 million) in Cyprus, are pledged as collateral
for funding from the ECB.
BOC PCL maintains a Covered Bond Programme set up under the Cyprus
Covered Bonds legislation and the Covered Bonds Directive of the
CBC. Under the Covered Bond Programme, BOC PCL has in issue covered
bonds of EUR650 million secured by residential mortgages originated
in Cyprus. The covered bonds have a maturity date on 12 December
2026 and interest rate of 3 months Euribor plus 1.25% on a quarterly
basis. On 9 August 2022, BOC PCL proceeded with an amendment to the
terms and conditions of the covered bonds following the implementation
of Directive (EU) 2019/2162 in Cyprus. The covered bonds are listed
on the Luxemburg Bourse. The covered bonds have a conditional Pass
Through structure. All the bonds are held by BOC PCL. The covered
bonds are eligible collateral for the Eurosystem credit operations
and are placed as collateral for accessing funding from the ECB.
Other disclosures
Deposits by banks include balances of EUR32,201 thousand as at 30
June 2022 (31 December 2021: EUR36,571 thousand) relating to borrowings
from international financial and similar institutions for funding,
aiming to facilitate access to finance and improve funding conditions
for small or medium sized enterprises, active in Cyprus. The carrying
value of the respective loans and advances granted to such enterprises
serving this agreement amounts to EUR62,735 thousand as at 30 June
2022 (31 December 2021: EUR71,321 thousand).
32. Capital management
The primary objective of the Group's capital management is to ensure
compliance with the relevant regulatory capital requirements and
to maintain healthy capital adequacy ratios to cover the risks of
its business and support its strategy and maximise shareholders'
value.
The capital adequacy framework, as in force, was incorporated through
the Capital Requirements Regulation (CRR) and Capital Requirements
Directive IV (CRD IV) which came into effect on 1 January 2014 with
certain specified provisions implemented gradually. The CRR and CRD
transposed the new capital, liquidity and leverage standards of Basel
III into the European Union's legal framework. CRR establishes the
prudential requirements for capital, liquidity and leverage for credit
institutions. It is directly applicable in all EU member states.
CRD governs access to deposit taking activities and internal governance
arrangements including remuneration, board composition and transparency.
Unlike the CRR, member states were required to transpose the CRD
into national law and national regulators were allowed to impose
additional capital buffer requirements.
On 27 June 2019, the revised rules on capital and liquidity Regulation
(EU) 2019/876 (CRR II) and Directive (EU) 2019/878 (CRD V)) came
into force. As an amending regulation, the existing provisions of
CRR apply unless they are amended by CRR II. Certain provisions took
immediate effect (primarily relating to Minimum Requirement for Own
Funds and Eligible Liabilities (MREL)), but most changes became effective
as of June 2021. The key changes introduced consist of among others,
changes to qualifying criteria for Common Equity Tier 1 (CET1), Additional
Tier 1 (AT1) and Tier 2 (T2) instruments, introduction of requirements
for MREL and a binding Leverage Ratio requirement (as defined in
the CRR) and a Net Stable Funding Ratio (NSFR).
The amendments that came into effect on 28 June 2021 are in addition
to those introduced in June 2020 through Regulation (EU) 2020/873,
which among other, brought forward certain CRR II changes in light
of the COVID 19 pandemic. The main adjustments of Regulation (EU)
2020/873 that had an impact on the Group's capital ratio relate to
i) the acceleration of the CRR II provision for the implementation
of the new SME discount factor (lower RWAs), ii) extending the IFRS
9 transitional arrangements and introducing further relief measures
to CET1 allowing to fully add back to CET1 any increase in ECL recognised
in 2020 and 2021 for non--credit impaired financial assets and phasing
in this starting from 2022 (phasing--in at 25% in 2022) and iii)
advancing the application of prudential treatment of software assets
as amended by CRR II (which came into force in December 2020). In
addition, Regulation (EU) 2020/873 introduced a temporary treatment
of unrealized gains and losses on exposures to central governments,
to regional governments or to local authorities measured at fair
value through other comprehensive income which the Group elected
to apply and implemented from the third quarter of 2020.
The Group and BOC PCL have complied with the minimum capital requirements
(Pillar I and Pillar II).
In October 2021, the European Commission adopted legislative proposals
for further amendments to Capital Requirements Regulation (CRR),
CRD IV and the BRRD (the '2021 Banking Package'). Amongst other things,
the 2021 Banking Package would implement certain elements of Basel
III that have not yet been transposed into EU law. The 2021 Banking
Package is subject to amendment in the course of the EU's legislative
process; and its scope and terms may change prior to its implementation.
In addition, in the case of the proposed amendments to CRD and the
BRRD, their terms and effect will depend, in part, on how they are
transposed in each member state. As a general matter, it is likely
to be several years until the 2021 Banking Package begins to be implemented
(currently expected in 2025); and certain measures are expected to
be subject to transitional arrangements or to be phased in over time.
The insurance subsidiaries of the Group, the General Insurance of
Cyprus Ltd and EuroLife Ltd, comply with the requirements of the
Superintendent of Insurance including the minimum solvency ratio.
The regulated UCITS management company of the Group, BOC Asset Management
Ltd complies with the regulatory capital requirements of the Cyprus
Securities and Exchange Commission (CySEC) laws and regulations.
The regulated investment firm (CIF) of the Group, The Cyprus Investment
and Securities Corporation Ltd (CISCO) complies with the minimum
capital adequacy ratio requirements. CISCO has been classified as
Non--Systemic 'Class 2' company under the prudential regime for Investment
Firms and is subject to the new IFR/IFD regime in full. The payment
services subsidiary of the Group, JCC Payment Services Ltd, complies
with the regulatory capital requirements.
Additional information on regulatory capital is disclosed in 'Additional
Risk and Capital Management Disclosures' included in the Interim
Financial Report 2022 and in the 'Interim Pillar III disclosures
2022', which are available on the Group's website.
33. Related party transactions
Related parties of the Group include associates and joint ventures,
key management personnel, members of the Board of Directors and their
connected persons.
Fees and emoluments of members of the Board of Directors and
other key management personnel
Six months ended
30 June
2022 2021
------------------- -------------------
Director emoluments EUR000 EUR000
------------------- -------------------
Executives
------------------- -------------------
Salaries and other short--term benefits 523 337
------------------- -------------------
Employer's contributions 35 20
------------------- -------------------
Retirement benefit plan costs 44 30
------------------- -------------------
602 387
------------------- -------------------
Non--executives
------------------- -------------------
Fees 663 615
------------------- -------------------
Total directors' emoluments 1,265 1,002
------------------- -------------------
Other key management personnel emoluments
------------------- -------------------
Salaries and other short--term benefits 1,397 1,792
------------------- -------------------
Employer's contributions 163 138
------------------- -------------------
Retirement benefit plan costs 105 100
------------------- -------------------
Total other key management personnel emoluments 1,665 2,030
------------------- -------------------
Total 2,930 3,032
------------------- -------------------
The fees of the non--executive Directors include fees as members of
the Board of Directors of the Company and its subsidiaries, as well
as of committees of the Board of Directors.
Other key management personnel
The other key management personnel emoluments include the remuneration
of the members of the Executive Committee since the date of their
appointment to the Committee and other members of the Senior Management
team (Extended EXCO) (prior to the change in the Group organisational
structure, those members of the management team who report directly
to the Chief Executive Officer or to the Deputy Chief Executive Officer
& Chief of Business). Mrs Eliza Livadiotou has been appointed as
member of the Board of Directors from 6 October 2021 and her emoluments
from that date onwards are disclosed within the Executive Directors
emoluments above.
Aggregate amounts outstanding and additional transactions
The table below shows the loans and advances, deposits and other
credit balances held by the members of the Board of Directors and
key management personnel and their connected persons, as at the balance
sheet date:
30 June 31 December
2022 2021
Loans and advances EUR000 EUR000
------------------ ------------------
-- members of the Board of Directors and other
key management personnel 2,504 2,364
------------------ ------------------
-- connected persons 773 164
------------------ ------------------
3,277 2,528
------------------ ------------------
Deposits
------------------ ------------------
-- members of the Board of Directors and other
key management personnel 5,127 2,687
------------------ ------------------
-- connected persons 3,145 2,254
------------------ ------------------
8,272 4,941
------------------ ------------------
Accruals and other liabilities
------------------ ------------------
-- balances with entity providing key management
personnel services n/a 1,199
------------------ ------------------
The above table does not include period/year--end balances for members
of the Board of Directors and other key management personnel and their
connected persons who resigned during the year.
The aggregate expected credit loss allowance of the above loans and
credit facilities is below EUR7 thousand as at 30 June 2022. All interest
that has fallen due on these loans or credit facilities has been paid.
All transactions with members of the Board of Directors and their
connected persons are made on normal business terms as for comparable
transactions, including interest rates, with customers of a similar
credit standing. A number of loans and advances have been extended
to other key management personnel on the same terms as those applicable
to the rest of the Group's employees and to their connected persons
on the same terms as those of customers.
Connected persons include spouses, minor/dependent children and companies
in which directors/other key management personnel, hold directly or
indirectly, at least 20% of the voting shares in a general meeting,
or act as executive director or exercise control of the entities in
any way.
Related parties also include entities providing key management personnel
services to the Group.
The table below discloses interest, commission and insurance premium
income, as well other transactions and expenses with the members of
the Board of Directors, key management personnel and their connected
persons for the reference period.
Six months ended
30 June
2022 2021
-------------------- --------------------
EUR000 EUR000
-------------------- --------------------
Interest income for the period 29 366
-------------------- --------------------
Commission income for the period 3 1
-------------------- --------------------
Insurance premium income for the period 206 160
-------------------- --------------------
Subscriptions and insurance expenses for the period 488 348
-------------------- --------------------
Staff costs, consultancy and restructuring expenses
with entity providing key management personnel
services - 7,035
-------------------- --------------------
Interest income and expense are disclosed for the period during which
they were members of the Board of Directors or served as key management
personnel.
During the six months ended 30 June 2022 connected persons of key
management personnel transacted with REMU for the purchase of a property
amounting to EUR58 thousand (30 June 2021: nil). The transaction is
made on normal business terms as for comparable transactions with
third parties.
In addition to loans and advances, there were contingent liabilities
and commitments in respect of members of the Board of Directors and
their connected persons, mainly in the form of documentary credits,
guarantees and commitments to lend, amounting to EUR130 thousand as
at 30 June 2022 (31 December 2021: EUR133 thousand).
There were also contingent liabilities and commitments to key management
personnel and their connected persons amounting to EUR1,181 thousand
as at 30 June 2022 (31 December 2021: EUR573 thousand).
The total unsecured amount of the loans and advances and contingent
liabilities and commitments to members of the Board of Directors,
key management personnel and connected persons (using forced--sale
values for tangible collaterals and assigning no value to other types
of collaterals) at 30 June 2022 amounted to EUR1,290 thousand (31
December 2021: EUR774 thousand).
During the six months ended 30 June 2022 premiums of EUR94 thousand
(six months ended 30 June 2021: EUR68 thousand) and claims of EUR20
thousand (six months ended 30 June 2021: EUR15 thousand) were paid
between the members of the Board of Directors of the Company and their
connected persons and the insurance subsidiaries of the Group.
There were no other transactions during the six months ended 30 June
2022 and the year ended 31 December 2021 with connected persons of
the current members of the Board of Directors or with any members
who resigned during the period/year.
34. Group companies
The main subsidiary companies and branches included in the Consolidated
Financial Statements of the Group, their country of incorporation,
their activities and the percentage held by the Company (directly
or indirectly) as at 30 June 2022 are:
Company Country Activities Percentage
holding
(%)
Bank of Cyprus Holdings Public Ireland Holding company n/a
Limited Company
-------- --------------------------- ----------
Bank of Cyprus Public Company
Ltd Cyprus Commercial bank 100
-------- --------------------------- ----------
EuroLife Ltd Cyprus Life insurance 100
-------- --------------------------- ----------
General Insurance of Cyprus
Ltd Cyprus Non--life insurance 100
-------- --------------------------- ----------
Card processing
JCC Payment Systems Ltd Cyprus transaction services 75
-------- --------------------------- ----------
The Cyprus Investment and
Securities Corporation Ltd Investment banking
(CISCO) Cyprus and brokerage 100
-------- --------------------------- ----------
Management administration
and safekeeping
BOC Asset Management Ltd Cyprus of UCITS Units 100
-------- --------------------------- ----------
Investments in securities
and participations
in companies and
schemes that are
active in various
LCP Holdings and Investments business sectors
Public Ltd Cyprus and projects 67
-------- --------------------------- ----------
Property trading
Kermia Ltd Cyprus and development 100
-------- --------------------------- ----------
Kermia Properties & Investments Property trading
Ltd Cyprus and development 100
-------- --------------------------- ----------
Land development
and operation of
S.Z. Eliades Leisure Ltd Cyprus a golf resort 70
-------- --------------------------- ----------
Auction Yard Ltd Cyprus Auction company 100
-------- --------------------------- ----------
BOC Secretarial Company Ltd Cyprus Secretarial services 100
-------- --------------------------- ----------
Bank of Cyprus Public Company Greece Administration of n/a
Ltd (branch of BOC PCL) guarantees and holding
of real estate properties
-------- --------------------------- ----------
Collection of the
existing portfolio
of receivables,
BOC Asset Management Romania including third
S.A. Romania party collections 100
-------- --------------------------- ----------
MC Investment Assets Management Problem asset management
LLC Russia company 100
-------- --------------------------- ----------
Problem asset management
Fortuna Astrum Ltd Serbia company 100
-------- --------------------------- ----------
In addition to the above companies, as at 30 June 2022 BOC PCL had
100% shareholding in the companies listed below, whose activity is
the ownership and management of immovable property:
Cyprus: Hamura Properties Ltd, Noleta Properties Ltd, Tolmeco Properties
Ltd, Arlona Properties Ltd, Dilero Properties Ltd, Ensolo Properties
Ltd, Pelika Properties Ltd, Cobhan Properties Ltd, Innerwick Properties
Ltd, Ramendi Properties Ltd, Nalmosa Properties Ltd, Emovera Properties
Ltd, Estaga Properties Ltd, Skellom Properties Ltd, Blodar Properties
Ltd, Tebane Properties Ltd, Cranmer Properties Ltd, Les Coraux Estates
Ltd, Natakon Company Ltd, Oceania Ltd, Dominion Industries Ltd, Ledra
Estate Ltd, EuroLife Properties Ltd, Laiki Lefkothea Center Ltd,
Labancor Ltd, Joberco Ltd, Zecomex Ltd, Domita Estates Ltd, Memdes
Estates Ltd, Thryan Properties Ltd, Edoric Properties Ltd, Canosa
Properties Ltd, Kernland Properties Ltd, Jobelis Properties Ltd,
Melsolia Properties Ltd, Koralmon Properties Ltd, Spacous Properties
Ltd, Calinora Properties Ltd, Marcozaco Properties Ltd, Soluto Properties
Ltd, Solomaco Properties Ltd, Linaland Properties Ltd, Unital Properties
Ltd, Neraland Properties Ltd, Wingstreet Properties Ltd, Nolory Properties
Ltd, Lynoco Properties Ltd, Fitrus Properties Ltd, Lisbo Properties
Ltd, Mantinec Properties Ltd, Colar Properties Ltd, Irisa Properties
Ltd, Provezaco Properties Ltd, Hillbay Properties Ltd, Ofraco Properties
Ltd, Forenaco Properties Ltd, Hovita Properties Ltd, Astromeria Properties
Ltd, Regetona Properties Ltd, Arcandello Properties Ltd, Camela Properties
Ltd, Fareland Properties Ltd, Barosca Properties Ltd, Fogland Properties
Ltd, Tebasco Properties Ltd, Homirova Properties Ltd, Valecross Properties
Ltd, Altco Properties Ltd, Olivero Properties Ltd, Jaselo Properties
Ltd, Elosa Properties Ltd, Flona Properties Ltd, Toreva Properties
Ltd, Resoma Properties Ltd, Mostero Properties Ltd, Helal Properties
Ltd, Pendalo Properties Ltd, Frontyard Properties Ltd, Bonsova Properties
Ltd, Garmozy Properties Ltd, Palmco Properties Ltd, Thermano Properties
Ltd, Venicous Properties Ltd, Lorman Properties Ltd, Eracor Properties
Ltd, Rulemon Properties Ltd, Thelemic Properties Ltd, Maledico Properties
Ltd, Dentorio Properties Ltd, Valioco Properties Ltd, Bascone Properties
Ltd, Balasec Properties Ltd, Bendolio Properties Ltd, Diafor Properties
Ltd, Kartama Properties Ltd, Paradexia Properties Ltd, Paramina Properties
Ltd, Nouralia Properties Ltd, Resocot Properties Ltd, Soblano Properties
Ltd, Talamon Properties Ltd, Weinar Properties Ltd, Zemialand Properties
Ltd, Asianco Properties Ltd, Cimonia Properties Ltd, Coeval Properties
Ltd, Comenal Properties Ltd, Finevo Properties Ltd, Mazima Properties
Ltd, Nesia Properties Ltd, Nigora Properties Ltd, Riveland Properties
Ltd, Rosalica Properties Ltd, Secretsky Properties Ltd, Senadaco
Properties Ltd, Tasabo Properties Ltd, Venetolio Properties Ltd,
Zandexo Properties Ltd, Flymoon Properties Ltd, Meriaco Properties
Ltd, Odolo Properties Ltd, Calandomo Properties Ltd, Molemo Properties
Ltd, Nivamo Properties Ltd, Samilo Properties Ltd, Sendilo Properties
Ltd, Baleland Properties Ltd, Prodino Properties Ltd, Alezia Properties
Ltd, Zenoplus Properties Ltd, Alepar Properties Ltd, Enelo Properties
Ltd, Monata Properties Ltd and Vertilia Properties Ltd.
Romania: Otherland Properties Dorobanti SRL, Green Hills Properties
SRL, Imoreth Properties SRL, Inroda Properties SRL, Zunimar Properties
SRL, Allioma Properties SRL and Nikaba Properties SRL.
Further, at 30 June 2022 BOC PCL had 100% shareholding in Obafemi
Holdings Ltd, Stamoland Properties Ltd, Unoplan Properties Ltd, Petrassimo
Properties Ltd and Gosman Properties Ltd.
The main activities of the above companies are the holding of shares
and other investments and the provision of services.
At 30 June 2022 BOC PCL had 100% shareholding in BOC Terra AIF V.C.I
Plc which is a real estate alternative investment fund.
At 30 June 2022 BOC PCL had 100% shareholding in the companies listed
below which are reserved to accept property:
Cyprus: Tavoni Properties Ltd, Amary Properties Ltd, Holstone Properties
Ltd, Cramonco Properties Ltd, Aktilo Properties Ltd, Aparno Properties
Ltd, Stormino Properties Ltd, Lomenia Properties Ltd, Carilo Properties
Ltd, Gelimo Properties Ltd, Rifelo Properties Ltd, Avaleto Properties
Ltd, Midelox Properties Ltd, Ameleto Properties Ltd, Orilema Properties
Ltd, Montira Properties Ltd, Larizemo Properties Ltd and Olisto Properties
Ltd.
In addition, BOC PCL holds 100% of the following intermediate holding
companies:
Cyprus: Otherland Properties Ltd, Battersee Properties Ltd, Bonayia
Properties Ltd, Janoland Properties Ltd, Imoreth Properties Ltd,
Inroda Properties Ltd, Zunimar Properties Ltd, Nikaba Properties
Ltd, Allioma Properties Ltd, Landanafield Properties Ltd and Hydrobius
Ltd.
BOC PCL also holds 100% of the following companies which are inactive:
Cyprus: Birkdale Properties Ltd, Laiki Bank (Nominees) Ltd, Thames
Properties Ltd, Folimo Properties Ltd, Paneuropean Ltd, Philiki Ltd,
Nelcon Transport Co. Ltd, Weinco Properties Ltd, Iperi Properties
Ltd, Finerose Properties Ltd, CYCMC II Ltd, CYCMC IV Ltd, Steparco
Ltd, Trecoda Properties Ltd and Romaland Properties Ltd.
Greece: Kyprou Zois (branch of EuroLife Ltd), Kyprou Asfalistiki
(branch of General Insurance of Cyprus Ltd), Kyprou Commercial SA
and Kyprou Properties SA.
All Group companies are accounted for as subsidiaries using the full
consolidation method. All companies listed above have share capital
consisting of ordinary shares.
Acquisitions of subsidiaries
During the six months ended 30 June 2022 and during 31 December 2021
there were no acquisitions of subsidiaries.
Dissolution and disposal of subsidiaries
There were no material disposals of subsidiaries during the six months
ended 30 June 2022. Renalandia Properties Ltd, Crolandia Properties
Ltd, Elosis Properties Ltd, Pariza Properties Ltd, Prosilia Properties
Ltd, Otoba Properties Ltd, Dolapo Properties Ltd, Nivoco Properties
Ltd, Polkima Properties Ltd and Fledgego Properties Ltd were dissolved
during the six months ended 30 June 2022. Vieman Ltd, Edilia Properties
Ltd, Limoro Properties Ltd, Stevolo Properties Ltd, Yossi Properties
Ltd and Jalimo Properties Ltd were disposed off during the six months
ended 30 June 2022.
As at 30 June 2022, the following subsidiaries were in the process
of dissolution or in the process of being struck off: Fantasio Properties
Ltd, Demoro Properties Ltd, Bramwell Properties Ltd, Blindingqueen
Properties Ltd, Buchuland Properties Ltd, Fairford Properties Ltd,
Salecom Ltd, Sylvesta Properties Ltd, Bocaland Properties Ltd, Tantora
Properties Ltd, Selilar Properties Ltd, Cyprialife Ltd, Imperial
Life Assurances Ltd, Philiki Management Services Ltd and Battersee
Real Estate SRL.
35. Investments in associates and joint venture
Percentage Type of investment
holding
(%)
------------ ---------------------
Aris Capital Management LLC 30.0 Associate
------------ ---------------------
Rosequeens Properties Limited 33.3 Associate
------------ ---------------------
Rosequeens Properties SRL 33.3 Associate
------------ ---------------------
Tsiros (Agios Tychon) Ltd 50.0 Joint Venture
------------ ---------------------
Fairways Automotive Holdings Ltd 45.0 Associate
------------ ---------------------
The carrying values of the investments in associates and joint venture
are considered to be fully impaired and their value has been restricted
to zero.
Apollo Global Equity Fund of Funds Variable Capital Investment Company
Plc (Apollo)
In March 2021, the Group completed the sale of its entire holding
of 34.2% of the UCITS of Apollo. The Group considered that it exercised
significant influence over Apollo even though no Board representation
existed, because due to its UCITS holdings, it possessed the power
to potentially appoint members of the Board of Directors. During the
year ended 31 December 2021, an amount of EUR137 thousand was recognised
in the consolidated income statement as the Group's share of profit
from Apollo. The loss on the sale of the investment in associate amounted
to EUR97 thousand and has been recognised in 'Other Income' during
the year ended 31 December 2021.
36. Events after the reporting period
Voluntary exit plan
In July 2022, the Group proceeded with a VEP for its employees, with
a cost of around EUR99 million. In total around 550 employees accepted
the VEP and are expected to leave the Group in the second half of
2022.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FIFSETRILVIF
(END) Dow Jones Newswires
August 31, 2022 02:02 ET (06:02 GMT)
Bank Of Cyprus Holdings ... (LSE:BOCH)
過去 株価チャート
から 6 2024 まで 7 2024
Bank Of Cyprus Holdings ... (LSE:BOCH)
過去 株価チャート
から 7 2023 まで 7 2024
